Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

Mr. Speaker: Order. I remind the House that long supplementary questions are unfair to hon. Members with later questions on the Order Paper.

Oral Answers to Questions — ENVIRONMENT

North-East

Mr. Foster: asked the Secretary of State for the Environment if he will make a statement as to how his policies will affect employment in the building and construction industry in the North-East.

The Secretary of State for the Environment (Mr. Michael Heseltine): Employment in building and construction will depend on the industry's response to the various measures I am taking to facilitate development.

Mr. Foster: Does not the Secretary of State realise that unemployment in the building and construction industry already accounts for 17 per cent. of the unemployment in the North-East and that in a recent survey 43 per cent. of the workers wanted to leave the industry because of insecurity? Will he now bring in a crash programme of building and construction work in areas of high unemployment? Would he like to start with the 400 unmade roads in my constituency?

Mr. Heseltine: Unmade roads are a matter for my right hon. Friend the Minister of Transport. A crash programme of the kind that the hon. Gentleman envisages would lead to increases in public expenditure which would actu-

ally exacerbate the very problems to which he has drawn the attention of the House.

Sir William Elliott: Is my right hon. Friend aware of the detrimental effect that local authority direct labour organisations have had on the building industry in the North-East this year?

Mr. Heseltine: I am grateful to my hon. Friend for that question. I am aware of that, and that is why my right hon. Friend the Minister for Local Government and Environmental Services is responsible for taking through the House legislation to control and regulate the activities of direct labour organisations.

Lead Pollution

Miss Joan Lestor: asked the Secretary of State for the Environment what action he proposes to take to reduce the level of lead pollution in the environment.

The Minister for Local Government and Environmental Services (Mr. Tom King): New regulations on the maximum lead content of food will come into force on 12 April; the maximum permitted level of lead in petrol will be reduced to 0·40 grams per litre on 1 January 1981; and the water industry, with Government encouragement, is pressing ahead with a programme to deal with problems of lead in water where they occur.
The Government will be considering the need for further action in the light of the report of the working party, chaired by Professor Lawther, which will be published on Friday.

Miss Lestor: May I thank the right hon. Gentleman for that interesting reply. Has he considered removing lead from petrol altogether, in line with action taken by at least two other countries? Is he aware of the growing concern among the parents of children living near motorways about the likely effects that the lead content of petrol will have on their children, both mentally and physically?

Mr. King: We are naturally aware of the concern and that is why we have supported the work of the working party which was set up by the previous Government. I think that the hon. Lady


will agree that it is sensible to consider the important report which will be published on Friday. We shall then all be better informed and be able to comment on the type of question that she has asked.

Mrs. Knight: Will my right hon. Friend bear in mind that there is a tremendous amount of concern about this matter, often coming from extemely well-informed people, especially with regard to the effects of lead pollution on children living near motorways? Will he constantly attempt to get across to the public what the Government are thinking, doing and feeling about this very important matter?

Mr. King: I hope that my hon. Friend will encourage as many people as possible to read the report of the working party, when it is published. It covers the aspects of lead in petrol and in the air, and other sources of lead in the environment which are also very important.

Mr. Denis Howell: Will the Minister agree that the report of the Department of Transport working party last June, which is likely to be reinforced by the Lawther report to be published on Friday, suggests that the alternatives facing the country now are either to reduce the lead content to ·15 or to remove it altogether? Will the Government therefore consider publishing a green paper setting out the respective merits of those alternative courses so that Parliament and the country at large can have an intelligent and informed debate and reach a consensus on which of those two courses would be the most sensible?

Mr. King: Clearly we would be very interested to hear the responses of all interested parties to the report of Professor Lawther's working party. I take note of what the right hon. Gentleman says.

Association of Metropolitan Authorities

Mr. Guy Barnett: asked the Secretary of State for the Environment when next he expects to meet the chairman of the Association of Metropolitan Authorities.

Mr. Heseltine: On 15 April, when I chair the next meeting of the consultative council on local government finance.

Mr. Barnett: Is it true that Sir Godfrey Taylor has withdrawn his officers from the grants working group because he is totally opposed to the block grant system which the right hon. Gentleman is putting forward and that the other local authority associations are similarly totally opposed to it? How can he operate such a system in the face of complete opposition by all the local authority associations?

Mr. Heseltine: I understand that the Association of Metropolitan Authorities meets tomorrow to discuss its latest reply to the conversations that we have had with it over a period of time. The fact is that, especially on the recalculation of methods for needs assessment, there is a broad measure of agreement between myself and the local authority associations.

Mr. Alton: When the Secretary of State next meets the chairman of the AMA will he discuss with him the report in The Guardian yesterday which said that the entire urban aid programme may be wound up? Will he also tell the House what intentions he has for ensuring that the partnership committees, such as those meeting in Liverpool on Friday, will rethink their priorities so that schemes such as those of voluntary organisations might also be considered?

Mr. Heseltine: I do not think that I shall spend a lot of time on the first suggestion with the representatives of local government, as there is no foundation in this story and, therefore, it would not be worth discussing.
As to the question about support for the voluntary organisations, I realise that there is a part to be played by them. I am having to consider very carefully within my Department the balance between the various claims that are put forward. I am anxious that the urban programme should be used for specific areas where there is to be a one-off and conspicuous effect, rather than accumulating a range of ongoing commitments, which prejudices one's ability to make new initiatives in following years.

Mr. Michael Morris: With regard to the meeting of the consultative council,


will my right hon. Friend confirm that whilst the original proposals from the local authority associations were entirely unacceptable, he has not closed his mind to any future proposals that may come from the associations, and that, if such proposals were to come forward, they would be considered in depth by the Government?

Mr. Heseltine: I am most grateful to my hon. Friend for his question, because it enables me to repeat to the House what my right hon. Friend the Minister of State said in Standing Committee D yesterday. The Government's view is quite clear. It is that we should proceed with the principle of block grant. If the local authority associations wish to come forward with amendments to the face of the Local Government, Planning and Land (No. 2) Bill, which would enable their anxieties about specific areas of concern to be dealt with, of course we shall look at them. But the Government feel that it is important now to establish that the principle of block grant is a priority of the Government.

Mr. Hattersley: Will the Secretary of State answers the question asked by my hon. Friend the Member for Greenwich (Mr. Barnett) a moment ago? Has Sir Godfrey Taylor withdrawn officials of the AMA from one of the working groups set up by the right hon. Gentleman because Sir Godfrey and the AMA disagree with the policy that the Government are now espousing?

Mr. Heseltine: No, the AMA is considering to what extent it should involve itself in the details. The meetings at which a withdrawal would have to take place have not happened. What is happening is that the AMA is considering what it should do to co-operate on the details of the scheme with the Government. It is important to understand that the Government are well in a position to proceed without detailed consultation with local government. [HON. MEMBERS: "What?"] However, I believe, as I have said to local authority associations, that the detailed workings will be a great deal better if local authorities co-operate in the examination of these details.

Departmental Manpower

Mr. Armstrong: asked the Secretary of State for the Environment how many

Civil Service posts have been left unfilled in his Department since May 1979; and what are the numbers, salary entitlements and grades of those left vacant.

Mr. Heseltine: This information could not be made available in the form requested without disproportionate effort. But between 1 May 1979 and 1 March this year the total number of staff employed in my Department fell by 3,505 or by 6·7 per cent. The number of vacancies in posts remaining on the Department's complement is constantly changing.

Mr. Armstrong: Does the Secretary of State recognise the very great damage that he is doing by his constant implication that those who work in the public services are somehow a drag on society? Does he recognise the personal tragedy to hundreds of boys and girls, young men and young women, in the Northern area who stayed at school, obtained extra qualifications, and who are now being forced to join the dole queue? Does not he understand that we cannot sack people and do without people in the public services without doing damage to the very services that the most vulnerable in the community require?

Mr. Heseltine: The right hon. Member will be fully aware that I have not sacked anyone. All that I have done is not to replace quite as many people as have, of their own free will, or in terms of voluntary retirement, left my Department. However, if the right hon. Member believes that the solution to the country's problems is to enhance the scale of the public sector, he will have to explain to those young school leavers the benefits of living with interest rates of the sort that have become all too familar recently.

Mr. Emery: Among his activities, will my right hon. Friend consider the joint manpower watch figures that he published only this week and the very disappointing figures of the reduction in manpower in local government, in both Conservative-controlled and other counties? What further steps can he or we take to encourage a better use of manpower at local level?

Mr. Heseltine: There is a question about this subject later on the Order Paper. I did not want to anticipate that. However, I believe that the publication of


figures for almost every local authority—the very few exceptions being authorities which have not submitted their figures—enables the debate about the number of people employed in local government to be extended on a very significant and sophisticated scale. I shall want those figures to be increased in sophistication later in the year, when I shall request local authorities to publish their manpower figures broken down department by department.
I think that what has happened conspicuously as a result of the initiative on Monday of this week is that now local authorities which thought that they were doing well are able to see just how well they have been doing as compared with other authorities broadly similar to themselves.

Mr. Oakes: How many of those unfilled posts are among the legal staff of the right hon. Gentleman's Department? Will he fill those posts to prevent him from making ultra vires decisions, as he appears to have done under the New Towns Act in regard to Stevenage and the disposal of new town assets?

Mr. Heseltine: I shall certainly find out how many are in the legal department, but I am sure that the right hon. Gentleman will realise at once that the quality of advice is nothing to do with the quantity of advice.

Mr. Mellor: Is my right hon. Friend aware that he is to be congratulated on effecting this reduction in manpower? This is the answer to those who are saying that savings are being made only at the sharp end of services. However, is he also aware that many of us on the Conservative Benches hope that similar progress can be made in each year of the present Government?

Mr. Heseltine: I am most grateful to my hon. Friend. I think that that is right. There is another general conclusion, that if I had announced that there would be 3,500 fewer employees when I first took over the Department, it would have been described by Opposition Members in the horrendous terms with which we are familiar. The fact that there are now 3,500 fewer people would, I dare say, not have come to the attention of the House if I had not answered this question today.

Regional Water Authorities

Mr. John Browne: asked the Secretary of State for the Environment whether he considers that the regional water authorities are sufficiently accountable to the ratepayer.

Mr. King: A majority of the members of each water authority are locally elected councillors who are responsible for representing the interests of the ratepayers.

Mr. Browne: I thank my right hon. Friend for that reply. However, in view of the Government's stated policy not only of reducing Government waste but simplifying bureaucracy, how does he justify the continuance and extension of separate billing of the water rate?

Mr. King: If I were quite frank with my hon. Friend, I think that, to quote a phrase used before, I could say that, without difficulty, I could confine my enthusiasm for direct billing within the bounds of decorum. But the fact is that this process had been carried out substantially through a large number of water authorities before we came to office. I do not think it is quite practicable to change this proposal. It is a fact that it will show savings for the water authorities, but I would not claim that there are net savings overall for the public purse.

Mr. Woolmer: Is the Minister aware that in Leeds direct billing has just been introduced and the ratepayers see an increase of over 100 per cent. in their water rate? This is causing genuine worry and anxiety. Will he consider, in particular, taking the water authorities back from direct billing? Secondly, will he consider extending rate relief for water rates? Thirdly, will he consider insisting that water authorities offer, publicly and straightforwardlly, a fortnightly or monthly system of payment, instead of frightening people, old people in particular, who simply cannot meet twice-yearly bills?

Mr. King: I should like to have details, if the hon. Gentleman would care to give them to me, of the particular percentage to which he has referred, because it is certainly very different from the average for the area. There must be very particular problems in that area. I understand the concern about the charges for the water industry. I have instituted, and


I am now in the middle of, a series of meetings—I understand that such meetings have never been held before—between the Minister responsible and the chairman and chief executive of each water authority, to consider with them how the water authorities are being run, and to consider more effective ways in which they might operate in the future.

Mr. Fletcher-Cooke: Is not the degree of local option in such vexed issues as the fluoridation of water supplies much less now than it used to be? Should not a greater degree of control be restored to the elected representatives of the people?

Mr. King: As my hon. and learned Friend will be aware, that is primarily a matter for my right hon. Friend the Secretary of State for Social Services. I shall be grateful if he directs his remarks and questions to my right hon. Friend.

Mr. Denis Howell: Is the Minister aware that there were regular meetings between Ministers and the chairmen of water authorities throughout the lifetime of the previous Labour Government?

Mr. Robert Atkins: No action was taken.

Mr. Howell: Action was taken. Is the Minister further aware that, as a result of those meetings, water authorities were asked to defer the implementation of direct charges? Will he confirm that it is not now possible to cancel them altogether and that they have to continue because they follow automatically from the Act of Parliament which the previous Conservative Government introduced, which has proved to be disastrous?

Mr. King: I think that the right hon. Gentleman's supplementary question must rank as one of the most confused questions asked during this Session. If he took such exception to the measure introduced by the previous Conservative Government he had plenty of opportunity to change it. I understand that the meetings that were held previously were held collectively with all the chairmen present. If one wants to get to the heart of the matter, it is necessary to deal with each authority separately and to talk about the separate problems of the in-

dividual areas. I do not think that such meetings have ever been held before.

Mr. Denis Howell: rose—

Mr. Michael Shaw: Get it right.

Mr. Howell: I will get it right. Is it not a fact that the previous Labour Government introduced a White Paper, in which were proposed the necessary changes, which was opposed by the then Conservative Opposition?

Mr. King: I do not know how many bites of the cherry the right hon. Gentleman proposes to take, but that is not correct either.

Offshore Pollution

Mr. Adley: asked the Secretary of State for the Environment if he will make a statement on the implementation of his agreement to use his Department as the co-ordinating body for the dissemination of information in the event of offshore oil pollution.

The Under-Secretary of State for the Environment (Mr. Marcus Fox): Information about oil pollution incidents at sea is part of the responsibility of the marine pollution control unit reporting to my right hon. Friend the Secretary of State for Trade. A contingency plan is being drawn up, however, for the coordination by the Department of the Environment of the local authorities' response to a very major incident threatening the coast and this will include co-ordination of information for local authorities.

Mr. Adley: May I thank my hon. Friend for his prompt response to our recent problems on the South Coast? However, does not his answer confirm that the Department of Trade and my hon. Friend's Department are responsible in part, with the Minister of Defence and the Minister of Agriculture, Fisheries and Food also being involved? Will my hon. Friend assure the House that he appreciates that these problems are aggravated by delay in dealing with them, that there is need for firm control and that somebody should be in overall charge especially in the early stages of the pollution problem?

Mr. Fox: I hoped that I had assured my hon. Friend that the Department of the Environment had a co-ordinating


role. I understand his anxieties. The main problems are speed and communication. My Department and the Department of Trade are giving these matters careful consideration, bearing in mind the recent incident.

Mr. Douglas: Will the Minister assure us that his Department and the Secretary of State for Scotland co-ordinate with the Department of Trade? With reference to the recent incident on the Forth, will he indicate whether the Ministry of Defence is also involved?

Mr. Fox: I can assure the hon. Gentleman that all Government Departments regard this as a matter of considerable urgency. Regular meetings take place and I have no criticism of the contact between Departments.

Mr. Grimond: Is the Minister aware that this matter, which he says is of considerable urgency, has been going on for a considerable time and that local authorities are still not satisfied about co-ordination and speed? What are the means at his disposal for finding the oil slicks?

Mr. Fox: It is difficult to pinpoint the basis of the complaints. I can say that wherever there have been incidents the Departments concerned have dealt with them all successfully.

Mr. Henderson: As oil pollution does not know where the Scottish-English border is, will my hon. Friend confirm that he has arrangements to ensure—together with his hon. Friends in the Ministry of Agriculture, Fisheries and Food and in the Scottish Office—that the fishery grounds will be carefully protected?

Mr. Fox: Yes, I can give my hon. Friend that assurance. In the past few days we have had a discussion of the sort that he has intimated. Such action is vital to deal with oil pollution disasters.

Mr. Dalyell: Is the hon. Gentleman aware that that is one of the most confused answers that we have had in this Pariament? After all that, where does the departmental buck stop?

Mr. Fox: I think that the House is deeply concerned about this issue, and the buck would quickly stop somewhere. I

have the feeling that the Department of the Environment would be at the fore-front and that before the buck reached my right hon. Friend the Secretary of State it would stop with me.

Mr. David Atkinson: Is my hon. Friend aware of the heavy cost to local ratepayers along the South Coast as a result of oil pollution on the beaches? What assurance can he give them that they will not be faced with more bills later in the year?

Mr. Fox: We have maintained the policies of previous Governments. We have always made it clear to local authorities that finance should not be any bar to dealing with these incidents. Over and above a certain figure my Department would help any local authority that was embarrassed.

Home Insulation Scheme

Mr. Bowden: asked the Secretary of State for the Environment if he will ensure that a specific allocation of resources is made available through the Homes Insulation Act for the elderly and disabled in the coming year.

Mr. Foulkes: asked the Secretary of State for the Environment if he will ensure that a specific allocation of resources is made available through the Homes Insulation Act for the elderly and disabled in the coming year.

The Minister for Housing and Construction (Mr. John Stanley): We have been giving very careful consideration how best to give extra help to elderly people on low incomes, whether they are disabled or not, under the Homes Insulation Act and an announcement may be expected very shortly.

Mr. Bowden: I am grateful to my hon. Friend for that reply. Will he ensure that the elderly receive their full share? Will he consider ways in which voluntary organisations that help the elderly to do this work—most of them cannot carry it out themselves—might receive additional financial assistance, encouragement and support not only from his Department but from local authorities?

Mr. Stanley: I am grateful to my hon. Friend. As he will be aware, we made important changes in the operation of the


homes insulation scheme last November, when we made it possible for payments to be made directly to contractors without elderly people on low incomes having first to obtain receipts. We also extended the scheme to council tenants. We have asked local authorities to give additional help to pensioners. I shall bear in mind what my hon. Friend has said about voluntary organisations and try to ensure that they get all possible assistance and information about the scheme.

Mr. Foulkes: Does the Minister agree that old people's homes are often among the oldest of housing and most in need of insulation, and that old people often do not see the value of such insulation, or perhaps do not have the financial balance to allow them to take advantage of the grant? Will he ensure that old people are given 100 per cent. grants for insulation in the announcement that he has indicated is about to be made, and that there will be adequate publicity to ensure that they take them up?

Mr. Stanley: In the autumn of 1979 we had additional publicity given to the scheme. That is much in our minds. As for additional help I must ask the hon. Gentleman to await the announcement.

Mr. Rost: Does my hon. Friend intend to improve the Act by reintroducing some of the amendments that were proposed by the previous Conservative Opposition, who opposed the measure introduced by the previous Labour Government?

Mr. Stanley: It is because of the amendments that the previous Conservative Opposition introduced that we are able to make special provision under the scheme for the elderly. That will assist us to make changes following the announcements.

Mr. Ashley: As there is abundant evidence that some local authorities use moneys allocated for the disabled and the aged for other purposes, will the hon. Gentleman recognise when he has completed his reconsideration that a specific grant is of crucial importance?

Mr. Stanley: The announcement to which I have referred will represent specific allocation for the elderly and those on low incomes.

Domestic Rates

Mr. Butcher: asked the Secretary of State for the Environment what is the average domestic rate increase in (a) inner London, (b) all London authorities, (c) metropolitan districts; (d) non-metropolitan districts in England; and (e) non-metropolitan districts in Wales.

Mr. King: The latest estimates for domestic rate increases next year are:—



per cent.


Inner London
35


All London authorities
30


Metropolitan districts
29


Non-Metropolitan districts in England
25


Non-Metropolitan districts in Wales
31

Mr. Butcher: Is my right hon. Friend aware that some 35,000 small businesses are considering leaving inner London? Is he further aware that one of the main reasons cited is the excessive increase in rate demands? Does he not agree that the predominantly Labour-controlled local authorities should consider bringing their rate increases more in line with their Conservative counterparts?

Mr. King: I saw those figures. I am not surprised that small businesses are concerned about the impact of rate increases in inner London. We are seeking to revive the economies of inner city areas. Councils are responsible for moderating their rate demands. The actions of those that do not make any such attempt will be counter-productive in any effort to make an inner city policy work. One conspicuous fact that shines out all too clearly from this year's rate increases is that the higher levels of rate increase have come from Labour-controlled authorities. The lower levels of increase have come from Conservative-controlled authorities. I hope that that point will be taken on board by electors at the district council elections.

Mr. Christopher Price: Is the right hon. Gentleman aware that any attempt to penalise inner London, by means of the various methods concocted in the Bill, will be resisted? Is he further aware that those methods are completely unjustified, because the problems facing inner London are much more serious than those found in some other parts of the country?

Mr. King: The proposals in the Bill merely seek to determine whether certain


authorities should get a larger amount of grant at the expense of other authorities, which may have been more prudent in their expenditure and which may receive less. If the hon. Gentleman wishes to discuss penalties, I should point out that there is no question about who has penalised the inhabitants of certain inner London boroughs. Certain councils—as the manpower watch figures will show—have imposed penalties by means of very high rate increases.

Mr. William Shelton: Is my right hon. Friend aware that the rate in Lambeth is rising by 50 per cent. this year, while that in Wandsworth is rising by 18 per cent? Is he further aware that Lambeth is increasing its staff, while Wandsworth has lowered its staff numbers? Will he reflect on the fact that Wandsworth's rate base is increasing, while that of Lambeth is dropping?

Mr. King: I am sure that my hon. Friend will agree that that is the inevitable consequence of what is happening. People cannot endure the rate increases that have been imposed in certain inner London boroughs. In the case he quoted, I think that rate increases of nearly 100 per cent. have taken place in the past two years. The adjoining Conservative-controlled borough of Wandsworth has made rate increases of, I think, 19 per cent. during the past two years.

Mr. Hattersley: Does not the Minister recall that elsewhere on Tuesdays and Thursdays he has said that he cannot publish the formula by which next year's rate support grant will be distributed, because the information on rates for next year is not yet available? Is it not true that he said that yesterday evening? How does that relate to the categoric information that he has given today on the same subject?

Mr. King: That must rank as the second most confused question today. The right hon. Gentleman has asked about next year's rate support grant settlement. That will be made next November and will accordingly be announced. Work is, therefore, only in the preparatory stages. The right hon. Gentleman is getting very muddled. In view of the encouragement that he has given to Labour-controlled authorities to increase their expenditure, the House will be interested to know

whether the right hon. Gentleman regards the figures that I announced in my original answer as satisfactory or disappointing.

Mr. Nicholas Winterton: Is my right hon. Friend aware that in the statistics that he quoted—

Mr. William Hamilton: Reading.

Mr. Winterton: I am not reading, I am referring to the question. Is my right hon. Friend aware that the borough of Macclesfield is included in the statistics that he quoted for the non-metropolitan district councils? Is he further aware that that borough increased its rate by ½p in the pound, having held the rate virtually steady for the past three years? Does not he accept that Macclesfield could do that because it sold its assets and reduced its staff by 4·5 per cent? Mr. Deputy Speaker, will my hon. Friend—[Interruption.]

Mr. Speaker: Order. I am sure that until then the hon. Gentleman's speech will have gone down well in Macclesfield.

Mr. Winterton: I am sorry, Mr. Speaker. I was living in the past, because you were not with us yesterday at Question Time. Will my right hon. Friend give an assurance that he will issue guidelines to all councils to ensure that they take up the example that has been given by certain well-managed and efficient Conservative-controlled district councils?

Mr. King: I am pleased with the efforts of the Macclesfield council and of many other Conservative-controlled councils that have frozen their rates for this year, or reduced them. We shall not issue guidelines. We regard that as a question for individual local authorities, their councillors and electorate to decide. We give responsibility to them. We hope to provide them with the information on which to make properly informed decisions.

Mr. Hattersley: Putting aside the ritual abuse beneath which the right hon. Gentleman always takes refuge when under pressure, does he have sufficient information about rate intentions to publish the formula upon which the transitional arrangements will be based? If he has that information, will he pubilsh it? If he does not, what is the force and strength of the original answer to the question?

Mr. King: That question is a lot more coherent than the previous one from the right hon. Gentleman. He has now got his dates right. The answer is "No". We do not yet have sufficient information. We have received about 80 per cent. of the returns. The figures read out were based on the latest estimates and those in turn are based on about 80 per cent. of the returns. We shall make the final adjustments in the rate support grant when we have the final figures in May or June. It is done every year at about that time. If the right hon. Gentleman had understood the previous system a little better he would have known that perfectly well.

Housing Mobility Scheme

Mr. Garel-Jones: asked the Secretary of State for the Environment how many households he expects will be rehoused each year under the new housing mobility scheme.

Mr. Stanley: It is not possible to make an estimate at this stage. However, both the scheme within counties and that between counties, together with the various provisions of the Housing Bill to which I referred in Standing Committee F on 6 March should materially help to improve mobility.

Mr. Garel-Jones: Is my hon. Friend aware that the new scheme being set up under his auspices is widely regarded as a major step towards increasing social mobility? What response has he received from individual local authorities and business organisations?

Mr. Stanley: As my hon. Friend is aware, the scheme was the subject of unanimous proposals by the local authority associations—the AMA, ADC and the LBA. We are working with them to set up a working group to develop the scheme within counties and that between counties.

Mr. Ford: Is the hon. Gentleman aware that under this Administration new housing has become so mobile that it has almost disappeared? Is he further aware that the number of housing starts this year is likely to be the lowest since the war? Does he not accept that that is nothing less than a recipe for increased misery and tension in society?

Mr. Stanley: The hon. Gentleman will recognise that one of the most important contributions that we can make towards mobility is that of producing a substantial expansion of home ownership. This Government will achieve that.

Unused and Vacant Land

Mr. Shersby: asked the Secretary of State for the Environment if he will list the local authorities which will be required to publish registers of unused or vacant land.

Mr. Heseltine: I am hoping soon to finalise consideration of this matter after informal consultation with certain authorities which I am now conducting. I shall then make an announcement.

Mr. Shersby: Will my right hon. Friend set a time limit for the publication of a preliminary survey on waste and vacant land in each local authority area? Does he not agree that such a survey would give information to local people and allow them to apply pressure in order to bring land on to the market?

Mr. Heseltine: I do not think that there will be any need for that. It is totally within the powers of each local authority to do it now. However, I intend to publish areas which, if Parliament approves the Local Government, Planning and Land (No. 2) Bill, will have registers of public sector land so that we can, on an experimental basis, find out the potential for bringing that land forward for development and more productive use.

Mr. Chapman: In the pursuit of open government, should not all local authorities be required to publish registers of vacant and underused land?

Mr. Heseltine: Perhaps the House will feel that it is right to go to that stage after we have had an experimental period of the sort to which I referred. However, I stress—and this is the heart of the matter—that it is totally within the power of local authorities to make such decisions and publish the registers now.

Local Authorities (Income and Expenditure)

Mr. Norman Atkinson: asked the Secretary of State for the Environment if he will now confirm that it is now not his


intention to seek statutory powers for the purpose of limiting in any way either the total non-capital expenditure of local authorities or the total amount they raise from local rating.

Mr. King: Yes, Sir.

Mr. Atkinson: I do not know how that answer fits in with all the confusion, but my question is posed in two ways. Is the Minister saying "yes" to both parts of the question? Will he confirm clearly that it is not the Government's intention to introduce any statutory powers relating to wage bargaining and the number of people employed by local authorities?

Mr. King: I do not know how that question arose as a supplementary to the previous one, but the answer, once again, is "Yes".

Mr. Marlow: Will my right hon. Friend help the hon. Member for Tottenham (Mr. Atkinson) by telling him how much money could be saved in public expenditure if Labour local authorities kept their rate increases in the forthcoming year down to the same level as those of Conservative-controlled authorities?

Mr. King: The total level of local authority expenditure is £22,000 million. I do not have the exact details of the figures available, but it is clear that by the much higher levels of average expenditure leading to rate increases this year, Labour authorities will substantially increase the burden on ratepayers in their areas.

Camden Council (Bloomsbury Housing)

Mr. Dobson: asked the Secretary of State for the Environment if he will give the reasons for his refusal to allocate funds to Camden council, in addition to that council's housing investment programme allocation, to pay for the rehabilitation of blocks of flats in Bloomsbury which fell into disrepair when they were owned by his Department.

The Under-Secretary of State for the Environment (Mr. Geoffrey Finsberg): Camden council's housing investment programme allocation represents its assessed overall needs within the total public expenditure available.

Mr. Dobson: I declare a personal interest. Will the Minister confirm that it

will be the continuing policy of his Department, when it sells Property Services Agency property, to leave the responsibility for bringing rundown property up to scratch to those to whom it was sold?

Mr. Finsberg: It was expected that the properties would be demolished. The price that Camden council paid for them reflected their condition. If Camden council buys more houses than it can efficiently manage, more properties will remain rundown and empty, as they do in many other parts of inner London which are controlled by Labour authorities.

Refuse disposal

Mr John Evans: asked the Secretary of State for the Environment if he has any plans to alter the existing statutory arrangements under which council authorities are both the authorities responsible for refuse disposal and the planning authority.

Mr. Fox: As part of the measures my right hon. Friend the Minister for Local Government and Environmental Services announced on 23 November, I shall seek powers to make county councils in England the planning authority for waste disposal planning applications. This will not affect the arrangements whereby local authorities acquire deemed planning permission for their own development.

Mr. Evans: Is the Minister aware that his answer is highly unsatisfactory? Will he not accept that it is a disgrace that waste disposal authorities have the right to give themselves planning permission for a waste disposal tip on anyone's doorstep, without the citizen concerned having a statutory right of appeal to anyone?

Mr. Fox: The hon. Member will be aware that the procedures by which local authorities acquire planning permission for their own developments are well established. Where this contravenes the structure plan, the Secretary of State can call it in for his decision. It would not be reasonable to expect local authorities to apply to another tier of government for permission of this kind.

Mr. Shersby: What consideration has the Minister given to the possibility of applying to the EEC environmental fund


for assistance with the rehabilitation of the older industrial areas?

Mr. Fox: I know of no application of that kind, but I shall certainly look at the position and write to my hon. Friend.

Local Government Staff

Mr. Best: asked the Secretary of State for the Environment what is the latest estimate of local government staff numbers in England and Wales.

Mr. Heseltine: The latest figures, taken from the December 1979 return of the joint manpower watch, are 1,724,768 full-time employees and 936,536 part-time employees, making a total of 2,661,304 or 2,090,769 full-time equivalents.

Mr. Best: Is my right hon. Friend aware that those figures demonstrate that over the past 12 months the only real growth area in some Labour-controlled councils has been in the increase in staff? Will he advise those local authorities how they might achieve savings, with consequent benefits to the ratepayers?

Mr. Heseltine: I am grateful to my hon. Friend for pointing out that there have been staff increases in too many authorities. I have no doubt that the publication of these figures will come as a profound shock to large numbers of authorities and their councillors of all political parties throughout the country. Because we have, for the first time, a basis of fact against which judgment can be made, I hope now that when local authorities next discuss running their authorities under tight control, they will be able to do so in comparison with other authorities similiar to themselves.

Mr. Norman Hogg: Will the Secretary of State agree that efficiency of local government would be better served without the dispute involving NALGO? Will he further agree that that association has acted responsibly, whereas the employers have acted totally irresponsibly? Will he talk to employers and press upon them the need to reach an early and amicable conclusion?

Mr. Heseltine: I am sure that that was an extremely good question. It had only one deficiency—I did not hear a word of it.

Mr. Hogg: I shall repeat my question. Will the Secretary of State agree that efficiency in local Government would be improved if we did not have an industrial dispute involving local government officers? That dispute is not necessary. It has been caused by the irresponsible, reprehensible and dishonourable actions of local authority employers who have failed to honour a commitment on the joint pay study.

Mr. Heseltine: I would have thought that the hon. Member would have felt as I do—that the local authorities should be left to make these decisions for themselves, rather than have the Secretary of State do it for them.

Mr. W. Benyon: Will my right hon. Friend agree that there are certain circumstances which should be qualified? For example, Buckinghamshire has a greatly increased child population. Consequently the local authority needs to employ more teachers.

Mr. Heseltine: I have no doubt that each local authority will want to qualify its own figures. But the mere fact that there is an increase in demand in one area does not mean that there could not be compensating economies in other areas.

Mr. Cryer: Will the Secretary of State accept that by virtue of—[Interruption.]—I note, Mr. Speaker, that Parliament is being turned into "Comic Cuts" judging by the apparel of some hon. Members who have just come in. Will the Minister accept that, by virtue of the last question, many Conservative-controlled authorities have actually increased services? Will the right hon. Member now stop his ceaseless attack on local authority services, many of which are vital and many of which represent first-class value for money? Is he aware that there are many thousands of dedicated local Government employees who do their best to provide decent services?

Mr. Heseltine: Of course there are many thousands of local authority employees who do their best—and often succeed—to provide a first-class service. The question is whether it is necessary to employ all of them in the public sector. That is the matter to be decided by local authorities in the context of what the country can afford. The fact is that


the country can no longer afford the present levels of staffing that we have in some authorities.

Housing Revenue Accounts (Rate Poundage)

Mr. Joseph Dean: asked the Secretary of State for the Environment if he will be issuing guidelines to local authorities regarding a maximum rate poundage that they can levy towards funding their housing revenue accounts.

Mr. Stanley: No, Sir.

Mr. Dean: Will not the Minister agree that, unless some aid or relief from rate poundage is given to the 50 per cent. of council house tenants who have to pay the full rent, the £2·10p increase means that these people will be the hardest hit section of the community as a result of the Government's public expenditure cuts?

Mr. Stanley: That is not the only source for meeting the defict on the HRA. I believe that local authorities will want to look carefully at their overall administration and running costs in view of the figures on manpower that my right hon. Friend has published.

Mr. Michael Morris: Why should every housing authority now not plan to reach a situation where the housing revenue account, given one year with another, is basically in balance?

Mr. Stanley: As my hon. Friend will be aware, that is one of the reasons why we thought it right to abolish the no-profit rule in the legislation before Parliament.

Development Commission (Report)

Mr. Hicks: asked the Secretary of State for the Environment when he expects to complete his consideration of the report of the review group in the Development Commission and its associated organisation, the Council for Small Industries in Rural Areas.

Mr. King: We hope to complete our consideration very shortly.

Mr. Hicks: In view of the effective and meaningful contribution that the Development Commission and CoSIRA play in sustaining economic activity in rural

areas, will my right hon. Friend give a guarantee that these two organisations will be maintained in principle and that their budget for the current financial year will not be less than last year?

Mr. King: I am well aware of the support for the work of the Development Commission and CoSIRA. While it is not yet possible to announce the outcome of full consideration of the detailed review, although it will be done shortly, I can confirm today that the basic role of the Development Commission and CoSIRA is recognised and the Government intend that their basic role should be continued.

Mr. Guy Barnett: Did the Minister notice the reply I received recently from his hon. Friend, which indicated that the Development Commission and CoSIRA are extremely effective in cost terms in the creation of jobs? Will he bear that point in mind in determining the size of the grant that he makes available, in view of rising unemployment, particularly in rural areas?

Mr. King: It is for the reasons that the hon. Gentleman has adduced that we propose that the basic role of the Development Commission and CoSIRA should continue. I am able to confirm that today. I hope that the hon. Gentleman will appreciate that public money is not the only source of help for the rural areas. We have encouraged the Development Commission and CoSIRA to attract private sector funds. I am pleased to say that they have been extremely successful in enlarging their resources without further call on the public taxpayer.

Mr. Maxwell-Hyslop: Has my right hon. Friend studied the extent to which the activities of the Development Commission have enabled county councils to get back their investment on money they have spent buying land for industrial development that has then come to fruition in partnership with the Development Commission?

Mr. King: There are a number of ways in which assets can be realised. We are anxious both for local authorities and for the Development Commission and CoSIRA, wherever possible, to recycle their assets by selling off successful developments to the private sector thereby


ensuring that public money can be used as effectively as possible.

Mr. Pavitt: Will the right hon. Gentleman's Department continue to encourage the work of the Co-operative Development Agency in rural areas. Is he aware that it draws, not on public finance but private finance and on individuals in small co-operatives, as well as working with both organisations mentioned in the question?

Mr. King: That is not a matter for my Department. It comes within the responsibility of the Department of Industry.

Rate Increases

Mr Jim Marshall: asked the Secretary of State for the Environment if he is now in a position to name the local authorities which have exceeded his guideline on rate increases and against which he intends to take punitive action.

Mr. Heseltine: It is still too early to say whether the transitional arrangements will be needed, and if so where the threshold should be set.

Mr. Marshall: Is the Secretary of State aware that his indecision in this area is causing a great deal of unease particularly among Labour-controlled authorities? Will he inform the House and local authorities, as a matter of urgency, what action he proposes to take?

Mr. Heseltine: I would have thought that the action should be taken by the Labour authorities which must have taken the matter into account when they set their level of rate increases.

Mr. Latham: Will my right hon. Friend confirm that while Labour local councillors in Leicester and elsewhere might regard Government action to hold down the rates as punitive, that is not how ratepayers regard the issue?

Mr. Heseltine: I have made it clear that the Government expect local authorities to play their part in containing the levels of inflation and to keep their expenditure under total control. If one looks at the level of rate increases now coming through, one finds that among the list of the 10 lowest there are no Labour authorities and that among the 10 highest there are no Conservative authorities.

Mr. Allen McKay: Will the right hon. Gentleman consider absolving from any clawback arrangement those local authorities that may be forced to impose a supplementary rate increase following the House of Lords decision on the Education (No. 2) Bill? These authorities are mandated to provide services for the electorate. That is what they are doing but the Government are penalising them.

Mr. Heseltine: There is a wide range of flexibility in the hands of local authorities over choosing where to seek economies. It is for them to decide.

Council House Sales

Mr. Dykes: asked the Secretary of State for the Environment what recent discussions he has had with the outer London boroughs on questions arising from the policy of selling council homes to sitting tenants.

Mr. Stanley: I have not had any recent general discussions with councillors of outer London boroughs on sales of council houses.

Mr. Dykes: I thank my hon. Friend for that reply. Where there are unnecessary bureacratic delays, when a preliminary valuation has been agreed or when remedial works are being carried out to improve a property prior to purchase, will the Minister see whether his Department can assist to get through those unnecessary delays?

Mr. Stanley: We have recently made an amendment to the general consent under which council tenants in the process of buying will not be penalised in terms of the increased valuation of their property if there are delays for administrative reasons or because of problems with improvements.

Mr. Douglas-Mann: Will the Minister admit to the House that the sale of council houses is bound to reduce substantially the estimated 120,000 re-lets upon which the housing policy review was based in assessing the need for council houses? Will he admit that the assessed need for council houses, after allowing for re-lets, was over 100,000 and that his policy will produce 35,000? Will he acknowledge that he has been refusing to answer questions that I have tabled about the evidence and that his policy is based on uninformed—

Mr. Speaker: Order. That question is almost as long as the hon. Gentleman's point of order yesterday.

Mr. Douglas-Mann: rose—

Mr Speaker: Order. The hon. Gentleman has asked his question.

Mr. Douglas-Mann: Two more words.

Mr. Speaker: No. The hon. Gentleman must be fair to the House.

Mr. Stanley: As the hon. Member knows, the right to buy has been put to the electorate and to the House. Both have been found by a large majority to be in favour of it.

Mr. Best: When the legislation enabling council house tenants to escape from the bondage of those local authorities that refuse to sell council houses becomes law, will my hon. Friend undertake a massive publicity campaign with advertisements so that every local authority and every tenant is aware of the enfranchisement that this Government will have effected?

Mr. Stanley: I can assure my hon. Friend that we intend to make known to all council tenants that the right to buy has been provided by this Government.

Mr. Soley: Does the Minister realise that this policy, combined with the failure to build council houses has led to a situation in West London where people have no hope of transferring from a GLC tenancy to another tenancy in the near future?

Mr. Stanley: I am glad to say that this is not the view of Conservative-controlled boroughs in London, all of which are selling at 50 per cent. discounts.

Rates Assessments

Mr. Edwin Wainwright: asked the Secretary of State for the Environment what action he intends to take with those local government authorities whose rates assessments are higher than the guideline limit he has fixed.

Mr. Heseltine: We shall decide whether to implement the transitional arrangements, and if so, what scale of penalties to apply, when final information on rating decisions is available.

Mr. Wainwright: Does the right hon. Gentleman realise that the stringent

sanctions taken by the Government are hurting tremendously the poorest families and children? Will he make certain that many local authorities that are determined to maintain social and individual standards are not punished?

Mr. Heseltine: I can think of nothing that contributes so much to the burden of poorer people, to whom the hon. Gentleman refers, than the level of rates that Labour authorities are imposing on them.

Mr. Lyell: Will my right hon Friend remember, in considering this problem, that one of the reasons why inner city authorities load the burden on to the rates is that so many of their ratepayers get rate rebates? Is he aware that the small businesses which are thereby attacked are disfranchised?

Mr. Heseltine: I am sure that those factors can play a part. The House will remember that another reason is that the Labour Party consistently encourages high levels of public expenditure, nationally and locally.

Mr. Dubs: Is the right hon. Gentleman aware that those local authorities which have imposed moderate rate increases, as he has called them—such as Wandsworth council—have done so at the expense of an increasing number of badly housed people, at the expense of the elderly, the disabled and others in the community who need help? What action does he propose to take in regard to those authorities?

Mr. Heseltine: The hon. Gentleman will know from recent by-elections in his area that the local people do not agree with him.

Mr. Nicholas Winterton: Can my right hon. Friend say what advice he gave to the Cheshire county council on his recent visit to Cheshire, and to county hall in particular, about the fact that it has increased the rate ahead of the Government guidelines, thus offsetting the good management of the borough councils within Cheshire?

Mr. Heseltine: The advice that I gave on that occasion was private, and I think it appropriate that it should remain private. However, these matters are essentially for the local people to decide and not for this House.

KAMPUCHEA

Mr. Stan Thorne: I intend to be exceedingly brief. I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discusing a specific and important matter that should have urgent consideration, namely,
the threat of famine in Kampuchea
The Guardian today highlights the problem of food in that country, the prospects for the future in terms of rice supplies, the inevitable movements of population in search of food, and the spiral of malnutrition, famine, and demographic chaos that can and will emerge unless action is taken to mount a massive input of food coupled with guarantees by the major world Powers regarding distribution, so that those in most need are supplied first.
Under the Standing Order I cannot debate the issues; I can merely indicate the nature of this specific, important and urgent matter. I am aware that important matters for the consideration of the House are to follow, but, Mr. Speaker, your visit to Canterbury yesterday, if it means anything, means that as a Christian nation we should be concerned for the people of Kampuchea at this time. We should be prepared to give what we can in terms of aid to relieve the suffering that is likely to occur in the absence of that aid. Indeed, their problems are far greater than any that we may experience in the near future, no matter what the Chancellor's Budget contains.
During prayers, the Chaplain referred to Christian love and charity. I hope that the House will have some in regard to the request that I make to you.

Mr. Speaker: The hon. Gentleman gave me notice before 12 o'clock noon today that he would seek leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discusing a specific and important matter that he believes should have urgent consideration, namely,
the threat of famine in Kampuchea
Anyone who listened to the hon. Gentleman would not fail to realise the importance of the subject. The hon. Gentleman knows that I do not decide whether that important subject is to be debated. I merely decide whether it shall be discussed tonight or tomorrow night as an emergency debate. As the hon. Gentleman knows, there are other avenues open to him.
The House has instructed me, in considering these applications, not to give my reasons. I listened carefully to what the hon. Gentleman said, but I must rule that his submission does not fall within the provisions of the Standing Order and, therefore, I cannot submit his application to the House.

BALLOT FOR NOTICES OF MOTIONS FOR FRIDAY 18 APRIL

Members successful in the ballot were:

Mr. Tony Speller
Dr. Keith Hampson
Mr. Christopher Price

WAYS AND MEANS

BUDGET STATEMENT

Mr. Deputy Speaker (Mr. Bernard Weatherill): Before I call the Chancellor of the Exchequer, it may be for the convenience of hon. Members if I remind them that at the end of the Chancellor's speech, as in past years, copies of the Budget resolutions will not be handed around in the Chamber but will be available to hon. Members in the Vote Office.

RETROSPECT

The Chancellor of the Exchequer (Sir Geoffrey Howe): In my Budget Statement last June I said that the economic situation that we inherited was a difficult one. I stressed that it would take time to check, and then to reverse, Britain's long-run economic decline—time, and resolute commitment to the right strategy, for a period of years ahead. It is important for that strategy to reflect the right lessons of years of disappointing economic performance.
Even in the 1950s and early 1960s our economy was lagging behind those of our competitors. But it was a period of low inflation and rising growth rates. Seen in retrospect, that period was something of a golden age. That was not, of course, the feeling at the time. From the mid-1960s onwards we became impatient to throw the resources of Government into efforts to do better, quicker. In rapid succession, we had a national plan for faster growth, devaluation, incomes policies, recurrent bouts of intervention in industry—and much else.
The increased scale of Government borrowing from the mid-1970s, as compared with the 1950s and 1960s, is an example of the impatience to which I have referred. Governments became increasingly addicted to deficit spending. This was particularly true of the United Kingdom at the time of, and after the first world oil crisis. Memories of the monetary and inflationary implications of what the Government then did are still vivid.
Eventually, it began to be recognised, as indeed the Leader of the Opposition said in 1976, that we could no longer spend our way out of recession. But although that break-through of realism has begun, the change in attitude has not got

far enough. Not everybody has yet accepted that public expenditure cannot go on growing while the economy stagnates.
Those years of often hectic Government action were equally notable for other things that did not receive the attention they deserved. As well as misjudging the importance of money supply and its proper control, we often paid no more than lip service to the role of private enterprise and to the importance of economic change as an agent of prosperity. Successive Governments acknowledged the need to reduce the power and privilege of organised labour. But in the event, its ability to damage the economy has increased.
The outcome is familiar to us all. Our underlying rate of growth has become steadily weaker. At the same time, we have come almost to tolerate inflation at rates that would have horrified an earlier generation.
The measures taken following the agreement with the International Monetary Fund in 1976 provided a brief respite.
The public sector borrowing requirement fell, monetary growth declined and pay settlements moderated. The inflation rate came down in 1977 and 1978. But the lesson was not well enough learnt. The money supply was again allowed to expand too fast, partly through excessive intervention in the foreign exchange markets. Fiscal policy was eased and the situation deteriorated again.

The Recent Past

During the 18 months to last June the underlying growth rate of sterling M3 was nearly 15 per cent. a year. That compares with the much more modest rate of about 8 per cent. in the year after the IMF measures. The incomes policy of the previous Government had collapsed. Earnings also grew by at least 15 per cent. a year. Not surprisingly it was consumer spending that gained most from this combination of monetary expansion, tax cuts and high pay settlements. In the year before the election the volume of consumer spending rose by more than 5 per cent. a year. That was much too good to last.

There was, indeed, a big price to pay for that short burst of apparent prosperity. Production failed to respond to the surge in demand and imports, especially of manufactures, rose sharply. The


current balance of payments, in surplus after the IMF agreement and helped by North Sea oil, moved back into deficit and inflation moved sharply upward.

Last year we made an important start on tackling that inheritance. We set about reducing the rate of monetary growth. We achieved large reductions in dangerously oversize public spending plans. We reduced the share of Government spending and borrowing in the nation's output. And when, last November, the money target looked like being exceeded, we acted promptly and decisively.

We have removed many unnecessary controls and obstacles to enterprise and individual effort. We have removed controls on pay, prices, dividends and foreign exchange, which can now be used freely to acquire productive assets overseas to the benefit of our exports and invisible earnings alike. My first Budget switched the tax burden from earnings to spending and greatly reduced oppressive tax burdens on enterprise.

But during the year that has just ended we have had to contend with a further major increase in world oil prices and with a substantial rise in the price of other commodities. The strength of sterling has to some extent cushioned their impact on domestic inflation. Even so, the price of oil and other inputs to manufacturing industry has risen by 41 per cent. since the beginning of 1979.

The rise in the oil price has also had severe effects on the world prospect generally. The outlook in the coming year is for a significant slow-down in growth and a worsening of inflation everywhere. The year-on-year increase in consumer prices in OECD countries rose from about 10 per cent., on average, in mid-1979 to 14 per cent. by the beginning of 1980.

Every major country is demonstrating its determination to resist this inflation by adopting a firm monetary and fiscal policy. The inevitable immediate result is lower output and higher interest rates. Since early last summer rates have risen by six percentage points, on average, in the major industrial countries. This is much the same as in the United Kingdom over the same period. The increase has been even more marked where the dollar is concerned. Between May last

year and the end of last week Eurodollar three-month rates rose by over 8 per cent. to 19 per cent.

The immediate prospect

That is part of the background against which to judge the poor short-term economic outlook for the United Kingdom. The Treasury projections published today suggest that output may fall in 1980 by up to 2½ per cent. This is more or less in line with outside forecasts.

It is important to understand the significance of this recession. There are some who argue, or at least seek to imply, that it is an entirely avoidable development, which need not be inflicted upon the British economy. Others seem almost happy to suggest that, so far from being avoidable, this recession is no more than a foretaste of much worse to come. Some uniquely critical pessimists contrive to convey both impressions at the same time.

The right view to take is that it is, in part, a consequence of the weakness in world demand, in part a consequence of our own inflation—still well in excess of the money supply target—

Mr. Russell Kerr:: Who told you that? Milton?

Sir G. Howe: —and in part, perhaps most of all, a consequence of the long-run decline of our economy. These influences are not insuperable. We can most certainly get through the difficult year or two that lie immediately ahead. The important thing is not to allow the difficulties to prevent us setting our feet on the right long-run path.

THE MEDIUM-TERM STRATEGY AND THE MONETARY TARGET

This is one of the reasons—though by no means the only one—why I intend to consolidate the start that I made last year by publishing today the Government's financial and monetary strategy for the medium term. This strategy is contained in part II of the Financial Statement and Budget Report, better known, perhaps, as the Red Book.

This strategy is by no means to be confused with a national plan—Opposition


Members may laugh—for it is concerned with only those things—very few of them—that the Government actually have within their power to control. The strategy sets out a path for public finance over the next few years. At its heart is a target for a steadily declining growth of the money supply. That is set alongside policies for Government spending and taxation, which will underpin that objective.

It will be clear from what I have already said that the Government continue to regard the fight against inflation as the first priority. It is an illusion to suppose that we have any real choice between defeating inflation and some other course. It is quite wrong to suppose that inflation is something with which only Treasury Ministers need be concerned. So long as it persists, economic stability and prosperity will continue to elude us. So long as it persists, social coherence will also elude us. Nothing, in the long run, could contribute more to the disintegration of society and the destruction of any sense of national unity than continuing inflation.

Inflation sets worker against worker, employer against employee, and sometimes even Government against their own employees. The violence of the picket lines and last winter's examples of hospital patients denied supplies, and of the dead denied burial, would have been unthinkable 20 years ago. They reflect the social disintegration caused by inflation. That is one of the reasons why the conquest of inflation is so important.

Monetary policy has an essential role to play in the defeat of inflation. Other countries recognise this very clearly. They recognise, too, that sustained monetary restraint is not an easy, automatic or painless solution. But they are convinced that it is essential. They are struggling to get back towards more balanced budgets, as we must. They recognise, as we must, that inflation cannot persist in the long run unless it is accommodated by an excessive expansion of money and credit. That is at the heart of what "monetarism" means in practice. It is a great pity that its practical, commonsense importance has been so confused by arid, theoretical dispute. Certainly the word "monetarism" should never have become a term of political abuse—least of all for use by those who have in the past claimed

to make a virtue of practising it.

It is an illusion to suppose that there is any real alternative to the strategy that I have outlined. Some commentators seek to blame our present difficulties on the pursuit by Government of unnecessarily tough policies. That is totally to misunderstand the position. Britain's present difficulties are so deep-seated and serious as to make tough policies inescapable. Relaxed monetary and budgetary policies might bring higher output—even higher living standards—in the very short run, though even that is questionable, but in reality they would simply fuel fresh inflation. Such policies would inevitably undermine the confidence of financial markets, industry, and consumers. The action that would then be necessary to deal with the ensuing crisis would, equally certainly, destroy jobs and cut living standards still further.

Restraint of the growth of money and credit is, then, essential, and it needs to be maintained over a considerable period of time in order to defeat inflation. That underlines the importance of the medium-term financial strategy.

That strategy, as I have said, sets out a four-year path for monetary growth, public spending and tax policies. I shall deal first with the monetary targets. By 1983–84, the last year covered by our spending plans, the target rate of growth of money supply will be reduced to around 6 per cent.—just half the rate of growth over the past year.

The monetary target for 1980–81

In keeping with that medium-term monetary objective, the target range for the growth of sterling M3 in the period to mid-April 1981 will be 7 per cent. to 11 per cent. at an annual rate. The base for this will be the most recent published figures. The target will thus relate to the 14 months from mid-February this year.

I am glad to say that monetary growth has already begun to slow down. In the first four months after the Budget sterling M3 continued to grow at the excessive rate—over 14 per cent.—that we inherited. But in the succeeding four months it fell to an annual rate of 10 per cent. Moreover, in the earlier period sterling M3 growth had been below that of other measures of the money supply. Currently, however, all the other measures, M1, total M3 and the various


indicators of wider liquidity, are growing less rapidly than sterling M3. The narrow measure, M1, actually fell over the last four months. So the turndown in the growth of sterling M3 probably understates the extent to which the measures in the last Budget and those that I took in November have already brought monetary growth under control.

This year's target will consolidate the substantial slowdown in the underlying rate of growth. At the same time the Governor and I have agreed—Interruption.]

I am referring not to any foreign or outlandish figure but to the Governor of the Bank of England. We have agreed that the supplementary special deposit scheme—generally known as the "corset"—should not be extended beyond mid-June, when the present guideline ends. One of the effects of the corset has been to encourage the development of credit channels just outside the banking system, such as the purchase of bank acceptances by the private sector. This process will be reversed to some extent when the corset ends. So sterling M3 will be swollen as earlier distortions unwind.

The increase in sterling M3 on this account will not, however, signal a change in underlying monetary conditions. The scale of this exceptional increase cannot be precisely measured or predicted, and we shall need to assess its effect both as it occurs and when the target is rolled forward in the autumn. If, as I hope, it can be accommodated within the target that I have just announced, that will point to a further slowing down of monetary growth.

By any standards this is a firm monetary policy. But it is an essential response to the inflation rate. As I have shown earlier, there is nothing unique to this country about what I have proposed. Other countries faced with similar problems have adopted similar remedies, as is shown by the determined measures introduced in the United States a fortnight ago.

Monetary control

It goes without saying that to accompany these policies we need to have efficient methods of monetary control. We already have the means to meet our medium-term objectives. The Green

Paper on monetary base control, which I laid before the House last week, will provide a basis for public discussions of how to improve control over short periods. The Governor and I hope to hear a wide range of views before deciding whether any further changes should be made.

The recent pressure on companies has resulted in a strong demand for bank lending which has contributed to the upward pressure on both money supply and short-term interest rates. I am sure that banks and their customers would be well advised, in the difficult economic conditions foreseen, to be cautious about the scale of their lending and borrowing. When the growth of bank lending falls back, this will add to the downward pressure on interest rates from today's measures.

THE FISCAL STANCE

The Public Sector Borrowing Requirement

But it is not intended to achieve this reduction in monetary growth by excessive reliance on interest rates. The Government's financial strategy, therefore, plans a substantial reduction over the medium term in Government borrowing as a percentage of national income. The relationship between the Budget deficit and the growth of money supply is not a simple one. It is erratic from year to year. But there can be no doubt of its importance, or that Government borrowing has made a major contribution to the excessive growth of the money supply in recent years. The consequence of excessive borrowing has been high nominal interest rates and, in capital markets, the crowding out of business by the State. This has held back investment. From now on, however, given the shape of the Government's plans for public spending, the Budget deficit should be reduced progressively to between 1 per cent. and 2 per cent. of output. This would be a little below the average in the 1960s.

During a recession, of course, it is widely recognised that the Budget deficit is increased by low tax receipts and high Government spending. Some increase in the ratio of the PSBR to the national income may be consistent with the maintenance of a given monetary target and


without itself requiring increases in interest rates, but in practice public sector borrowing has been too high during the last two years, as experience has shown. That lesson, and the continuing high inflation rate, make a big cut in the underlying deficit imperative this year.

In 1977–78, following the agreement with the International Monetary Fund, the public sector borrowing requirement as a percentage of output was 3¾ per cent. of notional income. In 1978–79, after the last Governments relaxation of policy it rose to 5½ per cent. In money terms the latest estimate is just over £9 billion.

Despite the expectation of recession, experience shows that it would be wrong to keep the actual PSBR at its current level as a percentage of national income. This could not be reconciled with the monetary target or with the counter-inflationary objectives of the medium-term strategy. We must not make the mistake of promising to correct the underlying weakness at some time in the future but failing to take the necessary steps today.

The monetary target that I have announced for the coming year will involve a substantial further slowdown in underlying monetary growth. If we are to meet that target without putting too much of the burden on interest rates, a public sector borrowing requirement of not more than 4 per cent. of national income in 1980–81 is appropriate. This would imply a money figure for the PSBR next year of not more than about £8½ billion.

Today's proposals will leave the total yield from taxation not much changed. Taking account of the effect of inflation over the past year and of the Government's public spending decisions, this represents a tightening of the budgetary stance. Indeed, in the absence of the substantial cuts in public spending since my last Budget, a very large increase in the burden of taxation would have been unavoidable.

Fiscal Policy in the Medium Term

The Government's spending plans are published today in the public expenditure White Paper. They are essential to the financial strategy. The path that we can now plan contrasts very sharply with past experience and intentions. We are not making panic cuts affecting the next year or two, leaving the long-term trend unaltered. We are not just reducing

planned increases. The level of spending is actually planned to fall steadily throughout the next four years. Without these economies, a coherent policy to reduce inflation would be unattainable.

Over the next few years receipts of taxes and royalties from North Sea operations will make an increasing contribution to Government revenue. Even so, the growth of revenue over the medium term is broadly dependent upon the growth of national output. This is conditioned by the growth of productivity, the growth of the world economy, and the speed with which we reduce inflation. Since the first oil crisis in 1973 there has been a world-wide decline in rates of economic growth. The growth of output in the United Kingdom has been less than half its previous rate, in spite of the contribution of North Sea oil. The recent rise in oil prices makes it unwise to assume that world and United Kingdom output will expand faster over the next few years than in the past five.

The projections for tax revenue in the medium-term strategy, therefore, rest on the fairly cautious assumption that after the recession forecast for 1980 the economy will grow by an average of only 1 per cent. a year up to 1983–84. This will undoubtedly seem rather modest. The economy should be capable of growing faster than this. But we must learn from recent history. In the past, Governments have almost always based their spending plans on improbably high growth rates, which were well above those achieved. To plan spending on over-optimistic growth assumptions can involve actions that, in the event, prevent that forecast growth being achieved. We should take credit for improved growth performance only once we have firm evidence that it has taken root.

So in preparing projections of the future of the economy, we must adopt a cautious approach. The Government cannot dictate the rate of growth of output. It is only as inflation subsides that there will be secure foundations for sustainable growth. The 1 per cent. a year that we are assuming is the same rate as was achieved in the years 1973 to 1979. We cannot prudently assume that we shall do better over the next few years, though we have every reason to hope that we can. The sooner inflation comes down, the faster the rate of growth


we can achieve within the monetary framework.

OVERCOMING INFLATION

A firm monetary policy, as the past year has shown, contributes to a strong exchange rate. Furthermore, sterling now has some of the characteristics of a petrocurrency. A strong exchange rate plays an important part in diminishing inflationary pressures, but at the same time it obliges United Kingdom industry to restrain costs and improve its competitiveness. That requires a fundamental change in attitudes.

Over the past years we have sunk into an unquestioning "cost-plus" mentality, where the impression is given that whatever wage increases are agreed can simply be passed on to customers. But exporters have been learning that their prices must be related as closely to their competitors' prices as to their own costs. The same lesson has to be learnt in pay negotiations. Just as exporters must base their prices on what their customers will pay, so pay settlements must be based upon what companies can afford, while remaining competitive.

There is a need for much greater public awareness of the link between pay increases, price inflation and unemployment. This subject has already been discussed in the forum of the National Economic Development Council, and we shall be returning to it again at future meetings. The more pay settlements can be moderated, the lower the transitional costs of the fight against inflation in terms of bankruptcies, lost production and reduced employment.

It is still a widespread, if tacit, assumption in too many places that if wages and prices go up fast the exchange rate will fall before long and restore any loss of competitiveness. This rests, not unreasonably, on repeated experience. But the authorities are no longer in a position to engineer a major reduction in the exchange rate in order to bail out those who have sought and granted excessive pay claims. Even if we could do this, it would create more inflation before long.

It is not only in collective bargaining and selling overseas that we must move away from a blind attachment to cost plus

and the idea of full protection against RPI movements. The problem goes far wider than that. There are many parts of our economic life where it is right to take some account of inflation, but a very damaging rigidity has grown up in how we do it. For example, until recently public spending programmes were controlled entirely in volume terms, without regard to changes in their costs. With cash limits an important step was taken away from an increasingly harmful practice. Again, it has been assumed that the real value of all social security benefits must always be maintained, whether production and incomes go up or down. This places the entire burden of adjustment on the working population. They, for their part, have responded by pressing for the income tax system to be fully indexed and by adding to their demands for higher wages. Inevitably, a substantial part of the burden of adjustment then falls on profits, and so on jobs.

So long as inflation persists there has to be some measure of price protection in relation to social benefits and taxation in a civilised society, but full protection for some is possible only at the expense of others. The proposals in this Budget recognise both the need to offset some of the effects of inflation and the fact that it is impossible to maintain the real value of all personal incomes when total national income is likely to fall.

If we are to master inflation the adjustments required of all of us are difficult but perfectly feasible. We should beware of the fashionable but misleading parallels with what happened in 1974 and 1975. They are merely a recipe for self-fulfilling pessimism.

After the oil price increases of 1973–74 our inflation went on rising for two years, reaching a peak year-on-year rate of 26 per cent. in the autumn of 1975. The oil price increases in the second half of 1979 have been just as large, but this time we have a good chance of seeing our inflation rate decline in the latter part of 1980. Monetary growth is now under better control. Unlike then, we have no backlog of inflation in the system, caused by earlier falls in sterling. There are encouraging signs of realism in private sector wage settlements. This is clear, for example, from information provided by the CBI data bank and from evidence of settlements linked to


genuine productivity deals. The underlying rate of inflation over the last six months is well below the present year-on-year rate.

Projections of growth and tax revenue can only be illustrative and imprecise, but those published today show that for the first time the Government of the day have coherent policies for money, tax and spending over the medium term. There should be scope simultaneously to reduce Government borrowing and to lower taxes, including progress towards a 25 per cent. rate of income tax. Publication of this strategy will assist decision-makers throughout the economy to work with the grain of Government policy, understanding the limits that it imposes and the opportunities that it presents. This strategy is the best foundation for higher growth, fuller employment and a return to rising living standards.

PUBLIC EXPENDITURE

At the heart of the medium-term strategy is the need to return to a sensible level of public spending and to see taxes and Government borrowing reduced. The spending plans that this Government inherited were too high, and were set to grow considerably faster than production. Most aspects of public spending are worth while if the nation can afford them, but too often we have endorsed plans for rising expenditure that we cannot afford. In the last 20 years the ratio of public expenditure to GDP has risen by a quarter.

It would be all too easy for that ratio to go on rising indefinitely unless we addressed ourselves to fundamentals. That is what we have done in what has been the most far-reaching review of medium-term expenditure plans since they began 20 years ago. This review is crucial to the strategy, crucial to success in reducing the public sector borrowing requirement, lowering interest rates, and bringing down inflation—and crucial if we are to find room for lightening the tax burden and so to provide scope and encouragement for enterprise and initiative.

The results are set out in the public expenditure White Paper published today. Publication of plans for expenditure at the same time as those for taxation has

long been widely favoured. The happy coincidence of the two on this occasion is mainly due to the time needed to review inherited expenditure plans fully, but it has enabled me to present together the Government's strategy for expenditure, taxation and the money supply in a way not attempted by my predecessors. One other result of this coincidence is that I have an unusually large number of tax and expenditure proposals to announce in this speech. Details of these are contained in press notices that are being issued today, an index to which can be found in the Vote Office.

The plans in the White Paper show, for the first time ever, a progressive reduction in total expenditure throughout the lifetime of a Parliament. By 1982–83 they will be over 11½ per cent. below those inherited from the previous Government. This reduction works out at over £11 billion at today's prices. Expenditure in 1983–84 is planned to be about 4 per cent. lower, in real terms, than in 1979–80. The effect will be a marked shift in the burdens imposed by the Government and in the balance between the public and private sectors. Above all, we shall have set the volume of public spending on the right course. We shall be creating a climate much more favourable to economic growth.

In the coming year, 1980–81, the reduction from the amount that our predecessors planned to spend is over £5 billion at today's prices prices—roughly equivalent to the revenue raised by an extra 7p on the basic rate of income tax. Since the White Paper published in November, further net reductions of over £900 million have been decided for the coming year. The Government have thought it prudent, however, to set aside £325 million of this for the Contingency Reserve. It should not be necessary to spend all that. These decisions reduced planned spending in 1980–81 by at least £575 million at current prices. Special sales planned for 1980–81 remain at the £500 million mentioned in the November White Paper. That compares with the £1 billion target for 1979–80 announced in my Budget last June. In the event, a total very close to £1 billion has been raised in that way.

In today's circumstances, any Government would have to check the size and growth of public spending. This does not


mean, and has not meant, that public expenditure should be cut indiscriminately. Our choices have been guided by the belief that the Government should provide efficiently and realistically those services that they alone are able and best fitted to provide. The role of the State can sensibly be reduced where it has taken over what private initiative can better achieve, and where it has been reducing incentives, increasing bureaucracy and distorting markets.

Only the State can provide adequately for the defence of its citizens against external and internal threats. The Armed Forces and police need to be strengthened and improved. Expenditure on defence, and law and order, therefore, is planned to grow—defence by 3 per cent. a year, in real terms, up to the end of the period, and law and order by 2½ per cent. a year. Spending on health will continue to grow exactly as planned by the last Government, at about 2 per cent. a year over the period. The cost of this increase will he partly offset by increases in charges, including in particular a £1 prescription charge, from next December. [Interruption.] These charges will yield in total about £30 million in a full year. [Interruption.]

Mr. Deputy Speaker: Order. It is a long tradition of the House that the Chancellor's Statement is heard in silence.

Sir G. Howe: One might have thought that no Labour Government had ever increased charges under the National Health Service. One might also be forgiven for thinking that the Labour Party overlooks the fact that the present wide range of exemptions from charges is and will be maintained, so that, for instance, the elderly, children under 16 and those on low incomes will be unaffected by the increases that I have announced.
But support from the taxpayer for private and nationalised industries is reduced. Provisions for housing is reduced. This reflects both the local authorities' own reduction in building programmes and what the nation can afford in public sector housing investment and subsidies. The reduction in the edution programme reflects a fair and sensible response to falling school rolls and a continuation of the economies to be made in 1980–81. Whilst the number

of pupils is expected to fall by about 13 per cent. between 1979–80 and 1983–84, spending on schools is planned to fall by only about 6 per cent. So spending for each pupil will increase, in real terms. The aid programme is also reduced, but remains substantial. It will now be in line with what a country in our present circumstances can afford.
Social security presents particular problems. This programme has been responsible for three-quarters of the total increase in programmes since 1973–74. This Government, no less than their predecessors, are committed to maintaining a social security structure that protects the weakest and most vulnerable in our society. But social security is now one-quarter of total public expenditure and still growing. It cannot be exempt from measures to restrain its growth where these can reasonably be made. Notwithstanding the changes that the Government are making, spending on social security is still expected to increase by nearly 4 per cent. between 1979–80 and 1983–84. I shall return to this area in more detail in a few moments.
There are those who sometimes speak as if all our problems with public expenditure could be solved by reducing bureaucracy while leaving subsidies and services untouched. The process of securing economy cannot be as painless as that. It is easy to forget that the entire cost of the Civil Service represents only one-fifteenth of public expenditure.
Even so, that expenditure represents a substantial cost. At the beginning of this Administration the Civil Service was larger by 40,000 than when we left office. Between 1974 and 1979 local government manpower had increased by over 200,000. Total public service manpower had increased by nearly half a million. It is no criticism of public servants to say that this could not go on. If it were to continue, by 1983 over one-fifth of the labour force would be employed in the public service.
Action has already been taken. The last Government made financial provision for a Civil Service of 748,000 at the end of this month. By 1 April 1981–12 months hence—the Civil Service will be smaller than that by at least 50,000. I cannot yet predict what the size of the Civil Service will be by the end of the


present Parliament, but we have made a good start. The Revenue departments, I am glad to say, have been playing their full part in this process of reduction. The numbers employed in the Revenue departments had grown from 87,000 in 1970 to 113,000 when we took office. At that rate, by the year 2000 there would be 175,000 tax collectors, which is more than there are soldiers in the Army.
That process of expansion is now being reversed. In 12 months' time the staff of the Revenue departments will be over 10,000 fewer than when we took office—a reduction of about 8½ per cent. The staff savings from my Budget last year amounted to about 1,400, and the tax measures that I am proposing this year will in themselves enable me to make eventual net savings of 1,700 staff in my departments.
My right hon. Friend the Secretary of State for the Environment and other Ministers have been taking steps that will help local authorities to reduce their manpower. There is now less detailed interference by central Government—fewer circulars and returns—and a large number of statutory controls are being removed. But, as my right hon. Friend the Secretary of State for the Environment pointed out on Monday, progress has been disappointingly slow. The planned reductions in expenditure imply a substantial reduction in local authority staff over the next four years. The local authorities must now give high priority to achieving just that.
The reductions that I have so far described are in the volume of public spending. We must also pay full regard to what it costs. Some of the reasons were eloquently explained to the House by the right hon. Member for Leeds, East (Mr. Healey) on 25 January last year, when he was still Chancellor.
On that occasion the right hon. Gentleman made an assumption that earnings in the 1978–79 pay round might increase by 15 per cent. He said that this assumption, which he described as pessimistic, would increase the cost of central Government and local authority services by £1 billion each in 1979–80 and raise the costs of the nationalised industries by nearly £1 billion.
Faced with such increases

—he said—
… the Government would be compelled to seek reductions in the volume of public expenditure."—[Official Report, 25 January 1979; Vol. 961, c. 756.]
He emphasised that this would inevitably increase unemployment.
We now know that the right hon. Gentleman's assumption about the likely growth in earnings proved all too true. Moreover, his own Administration left behind some large postdated cheques. The Clegg awards are expected to cost something like £2 billion in 1980–81 and the full-year effect of other comparability awards in the Civil Service will add a further £1 billion to that.
Public services and employment cannot escape the effects of inflation. Cash limits are the crucial instrument for ensuring that the costs of public expenditure do not run out of control. For central Government expenditure most of the cash limits for 1980–81 are contained in the parliamentary Estimates, published today. As already announced, they are based on provision for current cost increases of 14 per cent. When the Estimates were being prepared this seemed an adequate allowance for inflation between 1979–80 and 1980–81.
The projection that I am publishing today suggests, in line with those of most outside forecasters, that inflation may be a point or two higher. To increase the provision in the cash limits to accommodate the higher forecast of cost increases would be wrong. That would simply be to condone and encourage inflation. The difference between the provision in the cash limits published today and full provision for the inflation now forecast would be about £700 million. There should be scope to absorb such higher costs through greater efficiency It will not be easy. But the unaceptable alternatives would be to cut services or increase taxes.
In an important respect the reductions announced today are not complete. This country carries a heavy burden of Government payments overseas: first, spending on defence, especially the British Army of the Rhine; second, our net contribution to the European Community; and, third, overseas aid. Relative to our GNP we spend more across the exchanges on defence than any of our


NATO partners; we make far the largest net contribution to the EEC budget; and our aid programme—I hope hon. Members below the Gangway will support me on this—is larger than those of the United States, Japan or Germany. One result of the growth of these transfers has been to offset a large part of our substantial private sector earnings on invisible account of the balance of payments.
Of these transfers overseas the fastest growing and least justified has been our large net contribution to the Community budget. Although ranking seventh out of the Nine in GNP per head, we are now making the largest net contribution. The latest estimates by the European Commission again show that our net contribution is much larger than Germany's, whose GNP per head is twice that of the United Kingdom, and that most—if not all—of the other five countries with a higher GNP per head than ourselves are net beneficiaries of the budget. We also transfer substantial resources to our partners outside the budget through the artificially high prices imposed by the Community's agricultural policy.
The White Paper figures make no allowance for the reductions we are negotiating in the United Kingdom's net contribution to the budget of the European Community. Pending a satisfactory conclusion to those negotiations, they include the full estimated costs under present arrangements. If those arrangements are not changed, the likely costs will rise to more than £2 billion at today's prices by 1983–84. A successful outcome to the negotiations is therefore of the highest importance to our medium-term fiscal and monetary stategy and to the success of our attack on inflation. The Government's determination to redress the present unacceptable situation has, I feel certain, the support of the entire House.

SOCIAL SECURITY

I have already stressed the scale and importance of the social security programme. In the coming year it will absorb a quarter of public spending and cost about £20 billion—which works out at no less than £1,000 a year for every household in the country. Its

volume has grown by about 50 per cent. in the last 10 years, allowing both for inflation and the switch from family allowances and child tax allowances to child benefit. That rate of growth is more than three times the 15 per cent. increase in GDP over the same period. Some of this growth is accounted for by an increase in the number of beneficiaries, particularly the elderly. But much of it has come about not through any conscious decision but because the level and scope of benefits have been improved in anticipation of a growth in output which has not been achieved. It is a striking example of the nations capacity for spending money before it has been earned.

Any effort to curb the growth of public spending must, therefore, include this programme. One must recognise the differences between its various components. The programme covers a big range of benefits and beneficiaries. Any changes must reconcile the need, which we all recognise, to protect the most vulnerable members of society with the need to ensure that scarce resources are distributed in a way which does not unduly inhibit the creation of wealth. Standards of living and the benefits people are willing to finance must depend on a healthy, growing economy.

Any civilised society has a special obligation to those who have completed their working life. The standard rate of retirement pension will accordingly be increased next November by £6·15 to £43·45 for a married couple and by £3·85 to £27·15 for a single person. These increases fully reflect the Government's estimate of the rise in prices between the last uprating and the next. In addition, a £10 Christmas bonus will again be paid. Moreover, we propose substantial extra help for poorer consumers with their fuel costs next year. Much of this will go to the elderly. My right hon. Friend the Secretary of State for Social Services will be giving details tomorrow.

Again, any civilised society should provide a safety net below which a poor person's standard of living should not fall. We can all debate what is the proper level. Should it be a relative level or, as Beveridge had contemplated, an absolute level, which seeks to meet the basic needs of a person and his family? These are difficult questions. The answers are not


made any easier by the fact that the supplementary benefit scheme covers so many varied circumstances, with more than 3 million beneficiaries at any one time, ranging from the old and infirm to healthy young people capable of work. But clearly no action we take should be at the expense of the really weak and needy. Accordingly we propose that supplementary benefit rates, too, will be increased next November in line with the projected level of prices. A large part of the additional help with fuel costs which I have just announced will also go to supplementary benefit recipients, particularly the old and those with young children.

Besides the old and the poor there are others with special needs. One-parent families face particular problems. We propose that the additional payment to them should go up from £2·50 to £3 per week—an increase of 50 per cent. since the government came into office. The disabled also face special difficulties. The mobility allowance will therefore go up by £2·50 per week to £14·50 per week next November—again an increase of nearly 50 per cent. since we came into office. The family income supplement scheme will be improved so as to extend help to a further range of low income families where the breadwinner is in work. These families will also benefit from the fuel help scheme.

This demonstrates our determination to look after the elderly and the needy. But there is another aspect of the social security programme. The Government and the vast majority of the British people want hard work and initiative to be properly rewarded and are vexed by disincentives to work. One of the biggest problems is the lack of balance between social security benefits and incomes in work.

As my predecessor so often reminded this House, the net extra reward to a low earner from going out to work can be so close to the benefits he can get when on social security as to extinguish his incentive to find or stick to a job. Indeed, there are people whose incomes out of work exceed what they could reasonably expect to get when in work. There is undoubtedly widespread and justified public concern about this disincentive. It is doubly demoralising: first, to those

directly affected; and, second, to the large numbers around them, who quite reasonably see such provisions as unjust as well as harmful to the proper workings of the economy.

This is a complicated problem which cannot easily be resolved, but the Government are determined to tackle it. We intend to start with tax. Successive Administrations have always intended that short-term social security benefits should form part of a person's taxable income, in the same way as pensions and widow's benefits always have. The 1948 legislation said they should be taxable. It is only fair that a man who in the course of the year derives his income partly from work and partly from social security benefits should pay as much tax as a similar man who has earned the same total income. So far the administrative difficulties have always appeared insuperable. Now we are going to act.

First, we have the scheme, which my right hon. Friend the Secretary of State for Social Services announced before Christmas, whereby employers would have the responsibility for the payment of a minimum level of sick pay during the early weeks of sickness. This will bring the bulk of sickness payments into tax through PAYE. This scheme should be operating from April 1982. Secondly, we intend to bring benefits paid to the unemployed into tax at the same time. This will be done in such a way that in general the claimant will neither receive refunds nor suffer deductions of tax until he is back at work. We are also considering how best to bring into income tax at an early date the remaining short-term benefits, and invalidity benefit, which, primarily for administrative reasons, are at present untaxed.

But we do not have to wait until 1982 to do something about this problem. Subject to the approval of Parliament, these short-term benefits and invalidity benefit will, at the next uprating, be increased by 5 percentage points less than would fully reflect forecast price movements. In addition, the entitlement formula for earnings related supplement to these benefits will be altered from January 1981 so as to reduce the proportion of earnings reflected in benefit. None of these benefits comes within the tax net at present. What I am now proposing takes account of the


general agreement by successive Governments that they should.

The ERS scheme itself has been diminishing in worth and effectiveness over recent years. Redundancy payments are now more generous, and the development of the employers' sick pay scheme means that ERS is much less needed than formerly. Of the unemployed, only about 10 per cent. to 15 per cent. are in receipt of ERS at any one time. All in all, the Government would find it difficult to justify its retention. We therefore propose that the State provision of short-term benefits should in future be on a flat-rate basis and that ERS should be withdrawn in 1982, with no fresh claims being taken from the beginning of that year.

The large increases in the social security programme over the years reflect in part the heavy cost of automatically indexing the value of benefits in an open-ended way. One aspect of this is the system of index-linked pensions in the public sector, which includes those payable to retired Ministers and Members of Parliament. Serious doubts have been raised as to whether adequate allowance is made for the value of present pension arrangements in settling public sector pay. The Government intend, therefore, to set up an independent inquiry into that question.

I come now to child benefit, where a judgement is needed how far the impact of inflation should be offset. I have already explained the general problem that has to be faced in relation to both benefits and taxation. The Government propose that this benefit should be raised in November from £4 to £4·75 per week for each child. For nearly all basic taxpayers, this increase of 18¾ per cent. in child benefit will ensure that they are better oil than they would have been if child tax allowances and family allowances had continued and had been uprated in line with prices—and people who pay no tax at all are substantially better off.

Child benefit is, of course, paid in respect of every child in the country, regardless of the parents' circumstances. The increase that I have just announced will add over £400 million to public spending in a full year. An extra 10p per child per week would cost nearly £60 million a year. I have no doubt that in all the circumstances, I have done everything that

is reasonable to match the claims of those who are entitled to child benefit with those other recipients of social security.

Within the limited resources available, given the other pressures on the social security programme, these decisions represent the best balance between protecting the old, the poor and the needy, strengthening work incentives, and securing fairness as between the taxed and the untaxed. Full details of the changes will be announced tomorrow by my right hon. Friend the Secretary of State for Social Services.

Finally, I turn to an area where our social security system touches on industrial relations. More than 10 years ago one of my distinguished predecessors said:
we need to facilitate the smooth working of the process of collective bargaining in industry and to help to prevent the occurrence of unnecessary and damaging disputes, of which we have seen all too much recently, and which are totally incompatible with our economic objectives."—[Official Report, 15 April 1969; Vol. 781, c 1006.]
That is what Mr. Roy Jenkins said in 1969, when he announced the then Government's intention to press ahead with their proposals, "In Place of Strife". Eleven years later, little indeed has changed, except for the worse.

I shall refer today to only one aspect of this self-inflicted industrial damage. The social security payments that a striker may claim on behalf of his family can be one of several factors that sometimes tilt the balance of industrial power against employers and responsible union leadership alike. These payments have helped to sustain some very damaging strikes. The sums involved can sometimes be substantial. During the present steel dispute, for example, such payments have so far amounted to over £8 million. That figure would be enough, for example, to pay the full-year cost of another 50p a week on the one-parent premium or an extra £1 a week on mobility allowance. Payments to strikers are widely and understandably resented and we have carefully considered how best to change present procedures.

Supplementary benefit for strikers' families will not be withdrawn altogether, but once Parliament has passed the necessary legislation we intend that assessments for benefits will assume the striker to have provided £12 per week himself, whether in strike pay or in some


other way. Strikers' tax refunds will continue to be taken into account in assessing needs. Until now, part of the tax refund—equivalent to £4 per week—has been disregarded. In future regard will be had to the full refund. We propose, too, that when benefits paid to the unemployed are brought into tax, benefits paid to strikers' families shall be taxed similarly.

This is an overdue reform. The Government believe that it is entirely fair to assume that strikers have made some provision for their families' financial support, either through their union or by some other means. It can hardly be denied that unions need to accept fuller responsibility for supporting their members when on strike than some of them have done recently. This change will make an important contribution to restoring the balance that has so long been lacking in our industrial relations.

After the changes announced today, the social security budget will still be higher, in real terms, in each of the next four years than it was last year. These changes reflect new and responsible priorities, such as are inevitable in a period in which resources are scarce. Successive Governments share credit for the Welfare State, but social security cannot be regarded as exempt from re-examination and entitled always to take absolute priority over spending on defence, the police, hospitals or schools—or over the need for proper control of public spending as a whole. Once that fact is recognised, there can be no denying the case for modest economies in this programme.

THE TAX BALANCE

The tax measures that I am about to announce are consistent with the medium-term strategy and the overall budgetary framework. They also take account of the changes in the balance of the economy that have come about over the last year. Many are made necessary only by the impact of inflation upon the tax system. One of the many reasons why we need to master inflation, it may be thought—though not perhaps the most important—is that it would enable Chancellors to make much shorter Budget speeches.

Three developments in particular have influenced me: high pay settlements, high oil prices, and the high exchange

rate. Together, those developments have swung the balance strongly in favour of consumers and against companies, in particular against those companies facing competition from overseas, whether in home or overseas markets. Consumers have lost something as a result of the increase in oil prices. But the great majority have more than made up for this by big pay increases and the benefit they have received from income tax cuts, the high exchange rate and lower prices for imported manufactures. In 1979 average personal after-tax incomes increased by 20 per cent. while the profits of companies not engaged in North Sea operations fell by over 5 per cent. in money terms, and, of course, by much more in real terms.

In deciding the balance of my tax changes I see a stronger case for reducing the real burdens on companies and small businesses than on private individuals. Of course, not all companies have lost out. The oil companies are making large windfall profits. The banks are gaining from high interest rates. Some of these are in a position to contribute more by way of taxation. The financial position of most sections of business will be eased as interest rates come down. So far as tax changes are concerned, I shall concentrate the limited funds available to me on encouraging enterprise and on relieving specific pressures which are particularly damaging or unfair.

COMPANY TAXATION

Taxation of North Sea Oil

The Government's objective in taxing North Sea oil operations must be to strike a balance between the nation's claim to a share in the profits from this national resource and the right of those engaged in the risky business of oil exploration and development to a fair return on their efforts. Since my last Budget, world oil prices have increased dramatically. North Sea oil prices, which follow world prices, have risen by more than half, from about $20·70 to about $33·75 a barrel.

This substantial change has greatly favoured the oil companies. I therefore propose, for chargeable periods ending on 30 June next and subsequent periods, to increase the rate of petroleum revenue tax from 60 per cent. to 70 per cent. At the


same time, I propose to rectify some anomalies in the PRT rules concerning transfers of North Sea interests between oil companies and the taxation of gas. These are changes that the industry has requested. I also propose to introduce special PRT provisions for fields that span the median line between the United Kingdom and the Norwegian continental shelves.

I have one further proposal on petroleum revenue tax. It relates to the collection of tax. The PRT structure gives companies very early relief for capital expenditure. This means that PRT is not collected until some considerable time after a field has come on stream. The increases in oil prices have greatly strengthened the industry's cash position. I am satisfied that PRT payments can in future be made somewhat earlier. The Petroleum Revenue Tax Act 1980 went some way in that direction. I now propose to go slightly further.

We shall require companies which are liable to PRT for the chargeable period to 30 June 1981 to make at the beginning of March 1981 an advance payment for that chargeable period at a rate of 15 per cent. based on 1980 liabilities. Advance payments for later chargeable periods will be made in the same way but not necessarily at the same rate. These advance payments will be offsettable against normal payments of PRT.

In total, the changes in oil company taxation are expected to bring in an extra £535 million, making a total of petroleum revenue tax, corporation tax and royalties for 1980–81 of rather over £4 billion. We are thus ensuring that the nation as a whole secures a proper share of North Sea profits this year.

North Sea oil adds to national income mainly through increased Government revenues and oil company profits. Though the sums of money are large, we must not exaggerate them. Even in the years of peak production later this decade, no more than 6 per cent. of GNP is expected to come from the North Sea—equivalent to perhaps two years of the kind of economic growth we achieved in the 1950s and 1960s. This makes it all the more important that we should use the oil wisely, with an eye to our long-term economic interests. In particular, we should take

the opportunity offered by the growth of oil revenues to bring the level of public sector borrowing steadily down, and this is what our medium term strategy envisages.

Banks

In recent weeks there has been a good deal of comment about the profits declared by the clearing banks. Some represent a "windfall" to the banks, which arises from the combination of high interest rates and the fact that interest is not paid on current accounts. The windfall element is not a sign of enterprise or efficiency, as the banks themselves recognise. But it is equally irrational to attribute these profits to some wickedness on the part of the banks. They need the major part to strengthen their capital base, which would otherwise have been eroded by inflation.

There could, of course, be a case in principle for a special tax related to the windfall element in these profits, and I shall be considering that further. However, it has not yet been established that such a tax is either practical or entirely desirable in today's conditions.

Leasing

Leasing, in which the banks have been heavily involved, has grown rapidly in the past few years. Underlying that growth has been the 100 per cent. capital allowance, which leasing companies can claim on assets bought for leasing. The present rules apply to equipment leased to United Kingdom industrial and commercial companies, which would qualify in their own right for these tax incentives if they were to purchase the equipment for themselves. I do not propose any changes in transactions of that kind. Leasing finance of that sort has become an important—in many cases an essential—source of finance for investment in manufacturing industry. However, under the present tax rules these 100 per cent. allowances apply to all leased equipment. Thus, leasing effectively extends the benefits of tax incentives to certain users—such as overseas companies, certain public bodies in the United Kingdom, and consumers—who would not qualify for tax incentives if they had purchased the equipment themselves.

I propose to end those anomalies. As from 1 June expenditure on leasing involving these users will normally qualify


only for 25 per cent. tax allowances. There will be transitional provisions for leased television sets. Though the extra revenue in 1980–81 will be negligible, the saving in a full year will be over £200 million.

These provisions will replace, from 1 June, the stopgap provision for foreign leasing which I proposed on 23 October, when announcing the abolition of exchange control. They will also include measures to end the growing abuse of leasing by individuals for tax avoidance purposes. However the Motability scheme for leasing cars to disabled people will continue to benefit from the existing provisions.

Company liquidity

I have already referred to the difficult problems that many companies will be facing in the coming year, with great pressure on their liquidity. I have considered how far it would make sense for the Government to help them by major tax reductions. Such help could be provided only at the expense of much higher personal taxation or higher borrowing and thus higher interest rates. I believe that the greatest service which I can perform for business is to reduce the burden of financing the public sector and thus to get down interest rates. I have, therefore, given precedence to that objective.

Corporation tax and stock relief

However, there is, as I observed last June, a clear need to re-examine the corporate tax structure. I have already undertaken that there will be full consultation before changes are made. I understand that the accountancy profession will be publishing its new standard on current cost accounting later this month. We will, therefore, publish a Green Paper later this year, reporting the results of our general review of the present corporation tax provisions.

Meanwhile, I do not think that it would be right to change the rate of corporation tax or to make major changes in its structure. But I do propose one important concession to help companies which face a particular difficulty. A number of businesses in manufacturing, and certain areas of distribution, are concerned about the recovery charges which they will face as a result of reductions in

stock levels likely to arise either because of the general pressure on liquidity, or in some cases as a result of the steel strike.

I propose, therefore, to allow a substantial part of the stock relief recovery charge consequent on a reduction of stocks to be deferred for one year. This change will be subject to certain conditions, dependent on the extent to which stocks are financed on trade credit. The new relief will be given for business accounts ending after 1979–80. The cost is estimated at £210 million in 1980–81 and a further £125 million in 1981–82. While further relief is justified in the cases to which I have referred, there is criticism that the present stock relief may confer an unjustifiable advantage in certain circumstances. This is a complex matter on which detailed consultation will be needed, but my intention is to legislate next year in respect of accounts on which tax will generally be payable on 1 January 1982. This will give enough time for consultation.

Redundancy

I propose another modest measure affecting business taxation. I intend to provide relief for redundancy payments in excess of the statutory minimum paid when a business stops trading.

INDIRECT TAXATION

I turn now from companies to my other proposals for finding extra revenue. I begin with the indirect taxes. Last June I took an important step in implementing a change in the tax structure that everyone knew to be necessary. I carried out a substantial switch in the balance of taxation from direct to indirect taxes. I do not intend to go further in that direction this year. But I do intend to ensure that the real yield of indirect taxation is not eroded. Inflation can all too easily have that effect.

VAT

First, I shall deal with value added tax. Without the extra revenue from last June's Budget changes, it would have been quite impossible this year for any Government to avoid either much larger cuts in public spending or big increases in income tax. This is the first year in which the full yield of the 15 per cent. rate will be available. The


yield will be some £12,450 million in 1980–81. I propose no change in the 15 per cent. standard rate of VAT. I am, however, making a number of technical changes to ease the administrative burdens borne by small businesses—about which I shall have more to say later.

There have been signs that some large companies may have been delaying their VAT payments to the Exchequer. This must be corrected at the earliest opportunity. Customs and Excise are already taking steps, with my approval and within the existing law, to reduce the attractions of delay. But more needs to be done. I shall, therefore, be asking the House to raise the maximum penalty for late payment. My proposal is that it should be expressed as a proportion of the tax at stake. In practice, that will raise the penalty for only the larger companies. For them the existing maximum penalty, of £100 plus £10 a day, is clearly inadequate.

I also propose to remedy an anomaly in the coverage of VAT. Lubricating and certain other oils are currently zero-rated, without any real justification. We shall be laying an order to charge them at the full rate from Thursday 1 May. That will yield an additional £12 million in 1980–81 and £17 million in a full year.

I want also to inform the House today of my decision on one of the options for staff savings in the Customs and Excise. Concern has been expressed by a number of my hon. Friends and by representative business organisations at the possibility that we might withdraw the facility of monthly returns for those VAT traders who are entitled to claim repayments. I have carefully considered representations about the effect on business cash flow, and I do not intend to pursue that option any further.

Excise Duties

This year most of the additional revenue I need from the indirect taxes must come from the excise duties. Because they are applied to a physical quantity, the real value of their yield declines in times of inflation. A number of them have not been increased since early 1977 and many have been declining in real value over a much longer period.

Accordingly, taking the duties as a whole, I am proposing increases which will reflect the impact of the last year's inflation and keep the real yield roughly constant.

Alcoholic drinks and tobacco

I start with the duties on alcoholic drinks and tobacco, which were last increased three years ago. I propose from midnight tonight to increase the duties on drinks by amounts which, including VAT, represent about 2p on the price of a typical pint of draught beer, 8p on a bottle of table wine and 50p on a bottle of whisky. The tobacco duty will be raised with effect from midnight on Friday. Including VAT, the increase will represent 5p on the price of a typical packet of 20 king-size cigarettes. There will be consequential increases for most other alcoholic drinks and tobacco products, but rather less than the full amount on pipe tobacco. The increases on alcoholic drinks will yield £273 million in 1980–81 and £288 million in a full year. The tobacco increases will yield £180 million in 1980–81 and £195 million in a full year.

Betting and gaming

Next come betting and gaming. I do not propose any changes in the general betting duty or the pool betting duty. But the Government have been persuaded by some of the criticisms of the present duty on casinos made by the Royal Commission on Gambling. That duty depends heavily on rateable value. It is not an equitable tax, and the more profitable casinos are seriously undertaxed. From 1 October, therefore, the present duty will be replaced by one related more closely to the profitability of casinos, and designed to produce about two and a half times as much revenue in a full year. At about the same time, the duty on bingo will be increased from 5 per cent. to 7½ per cent. Provision will also be made in the Finance Bill for restructuring the duty on gaming machines. We intend to remove the duty on penny machines, and propose to increase the revenue from the very profitable jackpot machines usually found in clubs. These changes will yield £5 million in 1980–81 and £20 million in a full year.

Vehicle Excise Duty

I turn now to vehicle excise duty. Our predecessors announced their intention to


abolish the duty on cars and other petrol-driven vehicles. They proposed to make good the revenue loss by increasing the tax on petrol. As the House will recollect, after carefully reviewing the arguments, we decided that that was not a sensible change to make. Even if the tax had gone, the need for a vehicle register would have remained. That is essential to the police and for vehicle control. Much of the form-filling would have continued unabated. We decided that it was much better to keep the vehicle excise duty, but to achieve staff savings by streamlining its administration, along the lines which my right hon. Friend the Minister of Transport has already proposed. As part of that, he is announcing today that from October, four-monthly licences will be replaced by six-monthly licences. From August a stamp-saving scheme will be introduced to help motorists to budget for payment of this tax.

If the duty is to remain, we should be wrong to allow inflation to go on eroding its real value. Because of doubts about its future, the rates of this duty have remained unchanged since 1977. I therefore make no apology for proposing increases in the duty on most vehicles of about 20 per cent., and on the heaviest lorries of about 30 per cent. this year. As a result, the annual duty on cars will increase by £10, to £60. The larger increase on the heaviest lorries will reflect the high road costs which they impose on the community. These changes will produce an estimated additional yield of £240 million a year, but will still leave the vehicle excise duty lower in real terms than after the last increase in 1977.

I have one further small change to announce in vehicle excise duty. Electric vehicles at present play only a small part in road transport. However, they are much cleaner and quieter than vehicles powered by internal combustion engines, and they could bring big future energy savings. Because we want to encourage their further development, I propose to abolish vehicle excise duty on them. The cost in 1980–81 will be less than £2 million.

Road fuel duties

In my Budget last June, I stated that there was a continuing case for measures that would help us to conserve oil. The price of petrol in the United Kingdom

remains well below that in any other EEC country. If we are to ensure that our oil resources are not wasted, a duty increase is justified this year.

If we had decided, as the last Government had in mind, to replace VED progressively by higher petrol taxation I should have been obliged to consider increasing the price of petrol by at least 20p a gallon. That would have been necessary simply to replace the revenue formerly provided by VED. To match the VED increase I have announced would have taken the figure to 24p a gallon—and higher still if the present petrol duty were itself maintained in real terms.

Since we are retaining the VED, such large increases are not needed. Instead, I shall be increasing the duty on petrol, from 6 pm tonight, by the equivalent, including VAT, of 10p a gallon. For the past three years the rate of duty on derv has been higher than that on petrol. I have decided that we can no longer justify that differential, which has borne heavily on commercial and industrial users. Taking account of VAT, the increase in the duty on derv will be about 4p a gallon. That will mean that once again the duties on petrol and derv are the same. These increases will yield an additional £450 million from petrol, and £55 million from derv in 1980–81, and in a full year.

Rebated Oil

I also propose to raise the duty on heavy oil other than derv by about ½p a gallon from 6 pm tonight. This will yield an additional £50 million in 1980–81 and in a full year. I have decided not to increase the duty on burning oil and on domestic paraffin, which are the oils most commonly used in the home.

Summary

These VAT and excise duty changes will raise additional revenues of £1,260 million in 1980–81 and £1,305 million in a full year. They do not imply any real increase in indirect taxes as compared with 1979–80. The immediate impact effect on the RPI will be just over 1 per cent., but in the longer run these excise duty changes, by contributing to the reduction of the budget deficit, will help to ensure that inflation is brought down


and stays down.

Fringe Benefits

As I have explained, I do not believe that I should be justified in allowing the real costs of motoring and road transport to fall simply as a result of inflation. But if it is right in principle for road users to face a constant fiscal burden, it would not be fair to disregard the increasing unreality of the income tax charge levied on those who are partly sheltered from rising costs because they have a company car available for private use. The scales of benefit charged to income tax have been allowed to fall well behind any reasonable measure of true values. The present figures barely cover the current cost of tax, insurance and maintenance. That is unfair to the great majority of individuals who have to bear the full cost of car ownership, not to mention those who cannot afford to run a car at all.

I propose, therefore, to increase by some 20 per cent. the scale figures that are used for measuring the benefit of a company car for tax purposes. This change will be effective from April 1981. At the same time, there will be one modest relief. The qualifying annual mileage for business use, above which a reduced rate of tax is charged, should be reduced from 25,000 to 18,000 miles a year. In the light of our widespread consultations last year, I believe that these changes will generally be recognised as fair.

I have also been considering whether I ought to take action to charge tax on the value of petrol provided by employers for private use by their employees. This would present severe administrative problems, both for employers and for the Inland Revenue. Even so, I shall feel bound to contemplate action next year, if the provision of free petrol continues to spread at anything like its present rate.

As the burden of income tax is reduced, I would hope to see a decline in the provision of benefits in kind. It is consistent with that view for me to impose a reasonable charge to income tax on benefits which remain.

In that spirit, I approach one area this year that has so far escaped the eye of my predecessors. I refer to the provision

for employees of items such as suits of clothing and television sets. I propose to double, from 10 per cent. to 20 per cent., the proportion of the value of such objects taken as a measure of the annual taxable benefit. And I shall impose an effective charge where the items concerned are subsequently acquired by the employee for less than true value. I am also taking steps to increase from 9 per cent. to 15 per cent. the rate of interest used to measure the value of beneficial loans to employees, and to raise to £200 the limit below which the benefit of such loans is not charged to tax.

Fringe benefits are charged to tax only if the employee earns more than a certain amount, now £8,500. The case for abolishing that threshold has been pressed upon us. I have asked the Inland Revenue to consult employers and others about the administrative problems that might be involved in such a change.

INCOME TAX

I now turn to my main proposals for income tax. The cuts that I made last year were an important start on reducing the oppressive burden of direct taxation. At every income level, taxpayers now retain a significantly larger share of their incomes, which they are free to spend or save as they choose. I intend to do more in the future, but at a time when output is falling and we are making further heavy cuts in public expenditure I cannot afford to protect income taxpayers fully from the effects of inflation. This, then, must be a year of consolidation.

At first sight that would suggest increases in the personal allowances which fall some way short of the rise in prices during 1979, but this would have a number of undesirable effects. It would lower the starting point of income tax in real terms, compared with a year ago. It would increase the number of taxpayers. It would narrow the gap between tax thresholds and the main social security benefits, and it would impose particularly heavy burdens on those with the smallest incomes. All those effects would be most undesirable.

Given the limited scope available, I have considered how to avoid these consequences. I mean to do so by adopting an alternative approach. I propose


to increase the main income tax allowances by 18 per cent. or so, which is in line with the rise in prices and in conformity with the indexation requirement of the 1977 Finance Act. This will bring substantial relief to all taxpayers. But in order to afford this I intend to remove the lower rate band of taxation, levied at 25 per cent. on the first £750 of taxable income. This combination will protect the position of the very poorest taxpayers whilst ensuring that basic rate taxpayers receive some, though not complete, protection from the rise in prices.

The single allowance will thus be increased by £210 to £1,375 and the married allowance by £330 to £2,145. The corresponding allowances for people over 65 will go up by £280 to £1,820, and by £440 to £2,895. The income limit for the age allowance will go up to £5,900. Also, the additional personal allowance available mainly to single parents will go up by £120 to £770. The revenue cost of these increases in 1980–81 will be some £1,800 million, offset by a saving of £750 million from ending the lower rate band. I cannot this year make any further reductions in the income tax rates, so the basic rate will remain at 30 per cent. and the higher rates will also remain unchanged.

The case for the lower rate band was never at all clear. The 25 per cent. rate was not the effective marginal rate for more than a small number of full-time adult workers. For those on lower incomes an increase in the personal allowances would always have been more valuable than the lower rate band, and the existence of this lower rate band added significantly to the complexity of the tax system. Its disappearance will simplify and shorten the PAYE tables and reduce the administrative burden on employers and on the Inland Revenue, where there will be a valuable staff saving of 1,300 persons.

I am in no doubt that it is right, in a year when difficult choices have to be made, to concentrate on raising the tax thresholds for everybody, as I have proposed, by about 18 per cent. I am also in no doubt that it is necessary to abate the tax reductions that follow from that change by the abolition of the lower rate band. Taken together, these changes

are equivalent to an effective increase in tax reliefs of 11 per cent. for a married couple and rather less than that for single taxpayers. The 18¾ per cent. rise in child benefit implies a broadly comparable annual rate of increase—about 11 per cent.—over its April 1979 level.

Next, I come to higher-rate taxpayers. Given the substantial improvements last year it would not be appropriate to give major relief to higher-rate taxpayers this year. However, our progressive income tax system operates in such a way that those who pay tax at higher rates experience sharply increasing tax burdens in times of inflation. In the ordinary course it would be right to increase the higher-rate threshold and bands by the same proportion as the increase in personal allowances. That would imply 18 per cent. this year. But this year the improvements in personal allowances are partially offset by abolition of the lower rate band.

That change will have only limited significance for those on higher incomes, so I have decided not to raise the higher-rate thresholds fully in line with inflation, as I have done for the main personal allowances, but to put them up by only about 11 per cent. That is, as I have explained, broadly equivalent to the total net increase in tax reliefs that I have proposed for married couples paying tax at the basic rate.

In money terms the threshold for the higher rates will be raised to £11,250 and the threshold to the top rate of 60 per cent. to £27,750. There will be corresponding increases at the intervening points. So far from making the rich richer, these restricted improvements will result in an increase in the real burden of income tax for the higher rate taxpayer. The cost of increasing the higher-rate thresholds is £100 million in 1980–81 compared with a cost of £140 million if they had been fully indexed. I am also limiting this year's increase in the threshold to the investment income surcharge to 10 per cent., that is, to £5,500. However, with a view to consistent treatment in future years I shall include provisions in the Finance Bill that should ensure, with effect from next year, that the higher-rate thresholds and bands, together with the investment income surcharge threshold, are covered by indexing legislation in the same way as the main personal allowances.

For the typical married couple with two children the net effect of my Budget changes will be to increase their weekly income by £2·68 per week from November. For a single man with the same earnings the increase will be 49p per week.

The income tax changes that I propose will be given effect when new tax tables have been printed and distributed. They will be made together and will produce a net increase in take-home pay on the first pay day after 31 May.

Other income tax proposals

I am proposing two other small income tax changes that have long merited action.

I propose to exempt from tax and payments made to holders of certain gallantry awards, such as the Distinguished Conduct Medal and the Conspicuous Gallantry Medal. These will in future be treated in the same way as annuities payable to holders of the Victoria Cross and George Cross.

I want also to do something more for widows in the difficult time immediately following bereavement. I therefore propose to increase the present single allowance that widows receive for the tax year in which they are bereaved. The addition for that year will, at its maximum, bring the single allowance for widows up to the level of the married allowance.

Taxation of Husband and Wife

We have also been reviewing the treatment for tax purposes of husband and wife. This is a complex and important subject. I am grateful in particular to the Equal Opportunities Commission for the light which its publications have shed on this aspect of sex discrimination. In view of my relationship with the former deputy chairman of that body I hope that it is not improper for me to mention its work, but, as I have observed, it is easier to define the problems than to find the answers. Certainly, radical changes should not be made in haste. I propose, therefore, to issue later this year a Green Paper on this subject. I hope that it will stimulate further constructive debate. leading us ultimately to acceptable solutions.

PROMOTING PRIVATE ENDEAVOUR

Although, as I have just explained, this is not a year in which sweeping reductions of income tax are possible, that need not prevent our making sensible reforms in the tax system wherever the opportunity offers.

I have frequently drawn attention to the extent to which the tax system has woven itself deeply into the fabric of national life. Tax has been piled upon tax, often with little regard for their interaction. The accidental effects of this tax onslaught have often been as damaging as the direct consequences.

This Government came to office pledged to bring more simplicity and consistency to the tax system. We have already undertaken a series of major reviews. I should like here to thank both the Inland Revenue and the Customs and Excise for the heavy load of policy review work that they have carried out during the last nine months. This should all bear useful fruit in the years ahead. This year I have progress to report in three important areas where I believe that fiscal reform can encourage private endeavour—in connection with housing, the national heritage and voluntary organisations.

Housing

We wish to encourage the private provision of housing as well as wider home ownership. Home ownership adds to the quality of life. Private provision of housing means we can save public resources for other areas where a private sector alternative is not available.

My first proposal is designed in particular, to help first-time buyers. I have received representations from many quarters about the burden of stamp duty on house purchasers. Difficulty in acquiring a new home restricts the mobility of labour. Those at the lower end of the market—mainly, young couples—particularly deserve help. I do not think that these considerations justify us in making, this year, an increase in the mortgage interest relief ceiling, which I propose to maintain at £25,000. However, I think that it would be right to raise the starting point for stamp duty on transfers of property by £5,000 to £20,000. The limits for reduced rate bands will be similarly increased, by £5,000, so that the full 2 per


cent rate will now be reached at £35,000. This will cost £75 million in 1980–81, and £85 million in a full year.

Too many homes are under-occupied, or even standing empty. This is often a direct, even if unintended, result of rent control: sometimes, it is a consequence of planning policies, which my right hon. Friend the Secretary of State for the Environment is improving. There are also fiscal obstacles to the economic use of the available stock of property. I intend to deal with one of these this year. I propose a new and additional relief from capital gains tax to help people who let part of their homes. At present, these house-owners, when they come to sell, can find themselves unexpectedly faced with a capital gains tax charge. This change will encourage letting, and contribute to the better use of the housing stock.

The national heritage

Next, the national heritage. The House has already passed a Bill to set up the National Heritage Fund. The Finance Bill will include a provision to treat it for tax purposes as if it were a charity. The fund will be set up with an initial amount of about £12 million at its disposal. The Government will in future make an annual contribution to the fund, including the amount needed for the continuation of the acceptance in lieu system. But we should also do more to make it possible, both today and in the future, for owners of historic houses to look after their properties on behalf of the nation as a whole. The last Government took a similar view and introduced provisions to assist owners to set up maintenance funds for the support of their houses. But that scheme proved to be so restrictive that it has scarcely been used.

I intend, therefore, to recast substantially the maintenance fund provisions. If we are going to adopt this method of encouraging the preservation of our heritage—I believe it is the right one—then it is only sensible to make it work. Our fresh proposals will apply to the maintenance of buildings, historically associated contents, gardens, and land of historic, scenic and scientific interest. The overriding condition will, of course, be that the public should have reasonable access. These measures are intended to

cement a bargain between those who have to bear the cost of maintaining the national heritage, and the people as a whole.

Voluntary effort

The third way in which we aim to assist private action this year is by providing tangible Government support for the widespread and often unsung voluntary effort that goes on at every level of our national life.

It is important to do all we can to help charities and to stimulate private benefactors and helpers. A partnership between Government and voluntary effort can be the best way of meeting many pressing social needs, particularly when State spending has to be cut back. With this in mind, I have given careful consideration to the fiscal recommendations of the Goodman committee and of the National Council of Social Service.

I propose to double—to £200,000—the capital transfer tax exemption for bequests to charities; and to exempt wholly from development land tax all future disposals of land by charities. Income tax relief for payments to charities made under deeds of covenant, which has hitherto been limited to the basic rate of income tax, will be extended to the higher rates, subject to a ceiling of £3,000 a year. A minor stamp duty easement on deeds will be made. In response to representations, I am reducing the period for tax relief on deeds of covenant from seven years to four years. These measures, which will cost £30 million in a full year, are designed to provide the right conditions for substantial growth in the important partnership between voluntary service and the rest of the community.

ENCOURAGING PERSONAL INVESTMENT

I turn now to an area where the tax system can be used to involve the individual more closely in the workings of the economy. I refer to proposals which will encourage direct personal investment in the stocks and shares of British industry. In the last 20 years, the proportion of the equity of British companies, held in direct individual ownership, has been almost halved. This is a trend I should like to reverse.

It is generally agreed that share ownership and profit sharing can help in developing employees' understanding of, and commitment to, business and industry. I believe that share ownership can also spread a wider understanding of the role for risk-taking and initiative in the economic system.

I have two sets of proposals to make. First, I propose to make more generous the provisions which the last Government introduced two years ago to encourage profit-sharing. In passing, I would note that those provisions were based upon proposals originally put forward by my right hon. Friend the Secretary of State for Energy. They attracted all-party support. I propose to raised from £500 to £1,000 a year the value of shares allocated to any one employee which can qualify for tax relief; to reduce from five years to two the period after which employees can sell their shares; and to cut from 10 years to seven the period after which they can draw them out free of income tax.

Second, I propose to reintroduce legislation similar to that which Lord Barber introduced in 1973 enabling employees to be given options to buy shares in their companies without incurring liability to income tax. This scheme will have links, as in 1973, to a scheme for contractual savings. These measures will help to fulfil our promise to encourage employee share ownership and provide the incentive to save and build up capital.

There is one anomaly in the field of life insurance, which I propose to put right. The rate of life insurance relief used to be equivalent to half the basic rate of income tax. It has recently got out of line and I propose to restore the relationship by reducing it to 15 per cent. Because of the practical problems posed for the life insurance industry, the change will not take effect until 6 April next year. Steps will also be taken to deny life assurance premium relief to certain short-term bonds. This change will take effect from today.

Before I leave discussion of the capital markets I should add that I propose that traded options, which at present are anomalously treated as wasting assets for capital gains tax purposes, should in future be treated on the same basis as share warrants.

I hope that these measures will help to encourage the wider direct ownership of shares, by altering the relative attractions of investment through the institutions and through more direct means.

THE ENTERPRISE PACKAGE

I come now to a series of measures which are intended to increase the wealth-creating vitality of our economy. That means giving greater encouragement to the processes of economic change, and improving incentives to the enterprise sector. For the mainspring of economic vitality it is now widely agreed that we must look to private initiative, widely dispersed and properly rewarded. In truth, enterprise means jobs.

Capital Taxation

I start with capital taxation, which is widely regarded, and rightly so, as a severe discouragement to those seeking to build up a business and pass it on to the next generation. We have, as I promised last year, subjected capital taxation to a thorough review. Representations from a large number of bodies have confirmed that the damage done by these taxes in their present form is out of all proportion to their yield.

There is, of course, a place for capital taxation, including, in particular, a charge on death. But change is needed. What I can do this year must be constrained by our financial position. I am, therefore, proposing changes which will be of particular help to smaller businesses. This is an earnest of our determination to make further progress when economic conditions permit.

First, the march of inflation over the years has brought far too many estates into charge to the capital transfer tax. This is a particular burden on the small business, when it passes from one generation to another, whether on death or by lifetime transfer. I propose, therefore, that the threshold for the capital transfer tax should be increased to £50,000. This will exempt from the tax at least two-thirds of the estates which would otherwise have been liable; and up to 400 fewer staff will be needed than if we had left the threshold unchanged.

A reduction in the scale of rates above the new threshold, however much that is


needed, is not possible at the moment: nor are other changes I should like to have made. I am, however, making one or two minor changes designed to reduce administration.

In the case of the capital gains tax, I am fully conscious of the impact inflation has had. It can rightly be argued that the tax often falls on what are no more than paper gains. Proposals for indexation or tapering as a means of meeting this problem have been put forward on many occasions in the past. I have had both proposals re-examined but the conclusion to which I have come is that both would result in an unwelcome increase in the cost of administration—for taxpayers as well as for the Revenue—while reducing the yield of the tax to negligible proportions.

I cannot, however, leave matters as they are. I propose, therefore, to replace the present £1,000 exemption—which is progressively withdrawn above £5,000—by a straightforward allowance of £3,000. This change, which will operate from 6 April, will remove from tax half the cases at present liable, and at a reasonable revenue cost, it will reduce staff requirements by 300. As a corollary of this new proposal, there will be an exemption for the first £1,500 of gains for trust and investment and unit trusts will now be exempted from the tax, although investors in such trust will remain liable if their own gains in the year exceed the new exemption limit.

Finally, I propose to remove the present double charge on gifts, which arises from the overlap between capital transfer tax and capital gains tax, by providing rollover relief for the latter. This has been a particular source of grievance and one on which representations have been received from a large number of people.

The cost of these changes in the capital transfer tax will be £60 million in the coming year, and twice as much in 1981–82. In the case of capital gains tax, there will be no cost this coming year and a cost of £25 million in 1981–82. These figures need to be judged against the already rising yield of the capital taxes as a result of inflation.

I realise that these necessarily limited changes will fall short of what many people had hoped for, but I must ask for patience in present circumstances. Meanwhile, the benefit the present changes give

to the small business should not be underestimated. Because of the 50 per cent. relief—which will remain, as will the comparable relief for agriculture—a person transferring a business worth £100,000 will pay no capital transfer tax if there are no other assets. We would, of course, have liked to bring similar help to businesses of all sizes. My proposals do give some measure of relief to everybody, but this year most assistance goes to small businesses.

As I have already indicated, there have been extensive consultations on capital taxation before the Budget. We propose to continue that process. There are, in particular, certain specialised areas, such as settled property, which require very detailed consideration.

Development Land Tax

I now turn to another tax which can inhibit development—the development land tax. In my last Budget, I reduced the rate of this tax to 60 per cent. and increased the exempt slice to £50,000. I said then that there would be no further reduction in the rate and no early increase in the exempt slice. That remains the position. Representations have, however, been made to me from many quarters that the tax inhibits development because of uncertainty about the amount of tax chargeable which can normally be ascertained only once development starts. It is important to remove obstacles of that kind if we are to make the best use of our resources. I propose to deal with this point, and the necessary legislation will be added to the Finance Bill at an appropriate stage. There will also be a number of other detailed improvements. All these changes are designed to free the market and to encourage development.

Demergers

Taxes are stifling independent enterprise in other ways as well. For many years, the fashion both in Government and in industry was to favour mergers and amalgamations. No doubt mergers have brought advantages in some cases, but it is now quite clear that the fashion for industrial elephantism was greatly exaggerated. I believe that there are cases where businesses are grouped together inefficiently under a single company umbrella. They could in practice be run more dynamically and effectively if they could be "demerged"—I apologise for


that word, which has now become part of the jargon—and allowed to pursue their own separate ways under independent management. The present tax rules can in practice effectively discourage demergers of that kind, by charging the assets of the "demerged" company to advance corporation tax and income tax as distributions.

I propose to bring forward, during the passage of the Finance Bill, measures to ease the tax charge on distributions of that kind, subject to certain safeguards, and where they are concerned solely with the genuine splitting off of independent trades within the corporate sector. My colleagues and I would welcome any views which those outside Government might have on these proposals. It may be that further measures will turn out to be justified.

Specific Measures to encourage small businesses

I now turn to measures specifically designed to improve the tax environment in which the small business lives and works.

Any business, but particularly the new small business just starting up, needs somewhere to operate. An imaginative and helpful new venture in recent years has been the development of estates of small industrial workshops for separate letting to small businesses. I propose to bring in a small workshops scheme which will enable industrial buildings allowances at the rate of 100 per cent. to be claimed on the construction of small industrial buildings. The scheme will run for three years, and will simplify the present administrative arrangements. I shall also make provision for industrial buildings allowance to be given on the construction of industrial buildings rather than on their first lettings. In addition to my own proposals, my right hon. Friend the Secretary of State for the Environment intends to consult on relaxation of planning controls over changes of use as between light industry and warehousing for small units. My right hon. Friend the Secretary of State for Industry intends to make £5 million available to build 1,000 new nursery factory units in assisted areas in co-operation with the private sector.

New businesses, and particularly new small businesses, also need capital. Many people with capital to invest might be ready to back enterprising ventures if they knew that losses could be offset against taxed income, instead of only against capital gains. I propose that, through a new venture capital scheme, losses on equity investment in unquoted trading companies, incurred after 5 April 1980, may be set off against income.

Next, I propose to relax the conditions for tax relief for interest paid on money borrowed for investment in, or lending to, a close company. The present rules require an investor to have worked for the greater part of his time in the company's business. I propose to abolish that condition, and thus provide added incentive for outside investment in small firms.

Just as important as attracting new capital from the outside is the generation of new capital from the inside, in the form of profits which are retained in the business. The tax system has now contained for more than 50 years a series of provisions under which a close company may be required to justify the amount of profits which it wished to retain in the business, undistributed. Following last year's reduction in the rate of income tax, I now propose important changes, including the abolition of the apportionment of trading income both of close trading companies and of members of trading groups. These changes will cut out a thicket of complex tax provisions, which are time-consuming for the small trading business, and a real impediment to growth.

However, if small companies are to generate the funds to finance their expansion, they must first earn profits and then be left with sufficient of those profits after payment of tax. Better profits must come through improved efficiency and greater productivity. That is a matter for industry itself and not for Government. But Government can help by reducing the tax burden. I propose, therefore, to cut the small companies rate of corporation tax to 40 per cent.—that is no less than 12 points below the full rate of 52 per cent.—and at the same time to raise the qualifying limits to £70,000 for the full relief and £130,000 for the marginal relief.

My next proposal is designed to help the unincorporated small business. It is important that the self-employed should


be able, with tax assistance, to make adequate provision for their retirement. I am, therefore, raising the limits on retirement annuity relief. The normal percentage of earnings qualifying for tax relief will rise from 15 per cent. to 17½ per cent., and the ceiling on the premiums qualifying for relief will also be abolished.

Other changes

I also propose some minor measures affecting business taxation. Following consultations with industry, I propose that the costs of raising business loan finance should be allowed for tax purposes. Relief will also be given for pre-trading expenses of a business, provided that these expenses would have been allowable if the business had been trading when they were incurred. Certain changes will also be made in the tax deduction scheme for the construction industry—the 714 scheme—which will lighten the administrative burden of the scheme and change certain features which at present operate harshly.

As the last element in my package to help small businesses, I am making certain changes in the arrangements for VAT, in order to ease the administrative burden. I propose that from midnight, the registration threshold for VAT should be increased from £10,000 to £13,500. The de-registration limit will also be increased from 1 June. At the same time, I shall be increasing from £50 to £250 the relief from payment of tax on stocks and assets when a person de-registers.

Despite the severe financial restrictions, we are thus giving help to smaller businesses at many, many points where the system bears too hard. Individually, relatively few of the measures could be described as of major importance, but taken together they represent a significant step forward in making this country one in which enterprise will be properly rewarded and thus flourish again. Together they will cost about £160 million in a full year.

ENTERPRISE ZONES

Finally, I come to an idea—I knew that it would be widely welcomed—which is intended to pioneer a new, and more adventurous, approach to the whole question of industrial and commercial renewal. There are some parts of our economy,

most notably in the older urban areas, where more and more public authority involvement seems to have led to less and less fruitful activity. The planning process has all too often allowed, even caused, whole areas at the heart of some of our most populous cities to be laid to waste for years, even decades.

Even when plans are finally made the public purse is often unable to provide the funds, or the enterprise, to match the planners' aspirations. And when private initiative might have been ready to stir, it has generally been stifled by rules and regulations and by a tax system which pays no regard to these special problems.

Some hon. Members may recall that in a speech made on the Isle of Dogs a little less than two years ago I put forward a proposal for trying to bring new life back to these areas of urban dereliction. The idea was not politically partisan, for my thinking had taken place in parallel with that of the distinguished Fabian, Professor Peter Hall. Quite independently, we had concluded that there was much to be said for the establishment in these man-made wilderness of what I have called enterprise zones. I am, therefore, pleased to announce today action by the Government which will transform into reality the idea which I then put forward.

We are proposing to establish, in the first instance, about half a dozen enterprise zones, with the intention that each of them should be developed with as much freedom as possible for those who work there to make profits and to create jobs. Each will cover perhaps 500 acres. Within these zones two major tax incentives will be available—first, 100 per cent. capital allowances for both industrial and commercial buildings; and secondly, complete relief from development land tax.

But fiscal concessions are only part of what is needed. These zones will, therefore, enjoy the following additional benefits—100 per cent. derating of industrial and commercial property; a drastically simplified planning scheme; exemption from the scope of industrial training boards—with consequent exemption from industrial training levies; accelerated handling of applications for warehousing free of Customs duty; minimal requests


from Government for statistical information and abolition of the remaining industrial development certificate procedures.

I hope and believe that an imaginative experiment along these lines may succeed where conventional policies have proved inadequate. No one can doubt the need for change from present arrangements. In far too many of our towns and cities today, and for far too many businesses particularly small and new ones, the gap between a productive idea and a foreseeable profit has widened into a chasm of red tape. That red tape all too often stands between a young school leaver and the prospect of a job.

Even before this proposal had any official status there was no lack of interest in the idea. The Government will consult local authorities and other interests before decisions on individual areas are made. Fuller details will be found in the policy document which is being issued this evening. There could not be a better time for making a fresh start of this kind.

CONCLUSION

In the decade that lies ahead Britain has the opportunity to follow a more hopeful path. We have ended the 1970s with a society that is becoming less tolerant because we live with an economy that has been growing no richer. The 1980s can be very different.

The disappointments of the last decade spring from illusions that have persisted too long; the illusion that we can pay ourselves what we have not earned; the illusion that Governments may go on borrowing when they dare not tax; and, most foolish of all, the illusion that we can somehow strike our way to higher living standards. The essential condition for success in the 1980s is that we should turn our back on those illusions and that we should have the courage over a period of year to carry through the realistic policies to which there is no alternative.

In this Budget I have tried to set those policies in a strategy for the medium term. Nothing will be easy in the years immediately ahead, but beyond that the strategy offers hope of real success. It is a strategy for the defeat of inflation by

the re-establishment of monetary control. It is a strategy for the restoration of prosperity by the encouragement of enterprise.

Politics is not only the art of the possible; it is also the art of the necessary. The strategy outlined in this Budget is designed to do what is necessary and so lay foundations for the success which is well within the grasp of the British people.

Mr. Deputy Speaker: Order. Under Standing Order No. 94 the first motion, entitled "Provisional Collection of Taxes" must be decided without debate. When the matter has been disposed of, I shall call the Chancellor of the Exchequer to move the motion entitled "Amendment of the Law". It is on that motion that the Budget debate will take place today and on succeeding days. The remaining motions will not be put until the end of the Budget debate next week and they will then be decided without debate.

PROVISIONAL COLLECTION OF TAXES

Motion made, and Question,

That pursuant to section 5 of the Provisional Collection of Taxes Act 1968 provisional statutory effect shall be given to the following Motions—

(a) Spirits (Motion No. 2)
(b) (Motion No. 3)
(c) Wine (Motion No. 4)
(d) Made-wine (Motion No. 5)
(e) Cider (Motion No. 6)
(f) Tobacco products (Motion No. 7)
(g) Hydrocarbon Oil (Motion No. 11)
(h) Vehicle excise duty (Motion No. 12)
(i) Value added tax: liability to be registered (Motion No. 13).—[Sir G. Howe.]

put forthwith, pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

BUDGET RESOLUTIONS AND ECONOMIC SITUATION

AMENDMENT OF THE LAW

Motion made, and Question proposed,
That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance; but this Resolution does not extend to the making of—

(a) any amendment with respect to value added tax so as to provide—

(i) for zero-rating or exempting any supply;
(ii) for refunding any amount of tax;


(iii) for varying the rate of that tax otherwise than in relation to all supplies and importations; or
(iv) for any relief other than relief applying to goods of whatever description or services of whatever description; or

(b) any amendment relating to the surcharge imposed by the National Insurance Surcharge Act 1976 and applying to some only of the persons by or in respect of whom the surcharge is payable.—[Sir G. Howe.]

Mr. James Callaghan: The ordeal of addressing the House for two hours on a Budget speech is one which has not been shared by many and I would like to express to the right hon. and learned Gentleman our felicitations on the way in which he has delivered the Budget.
It is a difficult matter to prepare, as I know. There were not too many flights of eloquence in the Chancellor's speech. However, at the beginning I thought I heard the Chancellor say that sterling M3 would be swollen by unwinding the corset but that it could be accommodated within the target. I am not sure that I can do justice to that flight of fancy but I am certain that my right hon. Friend the Member for Leeds, East (Mr. Healey) will be able to do so tomorrow.
I am glad to note that there has been some feminine influence in the preparation of the Budget, exercised by the former deputy chairman of the Equal Opportunities Commission, even if that influence did not produce anything more than a Green Paper at this stage. I only wish that she might have had greater influence on some other parts of the Budget.
The right hon. and learned Gentleman has now become a Chancellor in every sense of the word. Not only has he introduced two Budgets: he has carried a Finance Bill through. That fully qualifies him to join the club. However, I warn the Chancellor. When I was Chancellor of the Exchequer in 1964, a short letter appeared at the foot of the correspondence page in The Times. It said:
Dear Sir,
Since the war there have been only two kinds of Chancellor of the Exchequer—those who left in disgrace and those who got out in time.
When I was Chancellor, inflation was 4 per cent. per annum and wages increases were 7 per cent. per annum. We

have just listened to the most depressing and pessimistic account of our position that I can remember for many years. Despite the growth in North Sea oil resources and revenues and the benefit and boom that they will bring, the Chancellor estimates a growth of only 1 per cent. per annum in our output from now until 1983–84. That includes North Sea oil.
Let us be clear. The Chancellor is really budgeting for a fall in output each year from now until 1983–84 in the non-oil sector. Only the oil gives him a growth figure. If that is not a most depressing and pessimistic account, I do not know what is. It contrasts vividly with the enthusiasm with which he approached his task last year. He told us then that it was an opportunity Budget. He said that his tax reductions were only a first step and that the Budget marked a turning point. Yes, it did, but the turning point was in inflation which has doubled in a year. There was a deterioration in our balance of payments of an incredible character considering the North Sea oil revenues and balance of payments' savings. A dramatic unemployment increase is forecast. We can expect a continuing decline in output with the highest level of interest rates that we have experienced.
The Chancellor of the Exchequer tells us that in the next three years he intends to preside over an economy which will combine stagnation, high unemployment, inflation and a deteriorating balance of payments. My right hon. Friend the Member for Leeds, East tells me that the figures which we have been given show a range for the inflation index for next year of between 14 per cent. and 19 per cent., with a halfway figure of 16½ per cent. That is the basis on which the Chancellor is going forward and on which he expects a response. He cannot expect to get one on that basis. The Chancellor has disillusioned the country with his pessimistic and dreary approach this afternoon.
Every good Budget should have a theme. It is possible to sum up the theme of this Budget. The theme is three years of austerity and industrial decline on the basis of a stagnating economy combined with shifting the burden from the healthy to the sick and from the rich to the poor.
This is certainly a consolidation


Budget. It represents a consolidation of failure. It is necessary to consider not only the Government's economic policies but their attitude towards our community. Just a few actions can set the tone. Let us consider one or two of them. We are told that we should consider public expenditure on social benefits against the tax that is required to raise the revenue devoted to them. The new system of producing the public expenditure figures only after the Chancellor has sat down should be reconsidered. It is unfair that the House should have no opportunity to consider the real aspects. That applies to all hon. Members. I do not dispute that there might be a good case for debating the Budget and the public expenditure figures together. However, the House should have the opportunity at least 10 days or a fortnight before the Budget to see the documents. I ask the Government to reconsider this matter because it has caused great inconvenience this year.
I shall not accuse the Government of anything but the new system hides the real consequences of some of the cuts in public expenditure. I should like to examine the documents with great care before I come to a conclusion. However, an inference can be drawn from what has taken place.
Let us consider public expenditure and tax charges together. Last year the Chancellor reduced the top rate of tax to 60 per cent. to give the £30,000 a year man £4,000 a year more. This year he is reducing the benefit payment for the sick by a figure 5 per cent. below the increase in the rate of inflation. Is that really what the House wants? Is it really the philosophy of the modern Conservative Party? I do not believe that we have a Conservative Government any more. It is a classic nineteenth century Liberal Government. Some Conservative Members would like to turn the twentieth century Welfare State into a nineteenth century board of guardians.
The Budget does nothing to help our exporters. There was hardly a word about the necessity of exporting or the consequences of it during the whole of the Budget speech. The Budget does nothing to assist our unemployed young people. It does nothing to reduce the highest interest rates that we have ever had. It

decreases output but does nothing to help it.
Last year the Chancellor made the fatal mistake of increasing VAT by about 4 per cent. just at the beginning of the union conferences. Once bitten, twice shy. He has not done that this year. He has increased the retail price index by a little over 1 per cent. If the Chancellor expects an inflation rate of between 14 per cent. and 19 per cent. in the next 12 months when the union conferences are beginning to discuss their claims for this year I can tell him from years of experience that the unions will rely upon that figure. How will the Chancellor break out? The Government repel the trade unions at every opportunity. They shut the front doors of No. 10 and the Treasury to the unions. The Chancellor should be seeking their co-operation from tomorrow to deal with the tragic situation. Otherwise, earnings will run far ahead of productivity and the position will be made even worse than it is today.
The Chancellor should call the unions in. He should swallow his pride and see what can be done to help us avoid a repetition of the last 12 months. The Chancellor has hung the money targets and public sector borrowing requirement around his neck. In the next two or three years he will slowly tighten the noose. If he does not, someone else will tighten it for him.
If the Chancellor feels that in the interests of his policy—a policy which we do not accept—he must make petty and mean charges, it would be far better to impose a further increase on the price of cigarettes, for example, than to charge the sick. I am sure that the country would accept that. The Chancellor reveals an improper sense of priorities in his mean and petty savings.
The Chancellor was speaking for one hour fifty minutes before he said anything about unemployment. But he said nothing about the fact that, according to the latest publications, youth unemployment may double by this time next year. There is no recognition of this in the Budget. As I know already from the public expenditure figures, the Government have cut £100 million from the Manpower Services Commission for 1979–80, and £170 million for 1980–81. Twenty per cent. of all the unemployed are now long term. The Government are closing


down youth training centres and skill-centres. Every hon. Member has received a memorandum today showing that the places available for training in London for unemployed young men and women are to be cut by one-third.
Is this really the kind of Budget and are these really the kinds of proposals and priorities that the Government think are acceptable to the country? I tell the Government that they are not. We note the pathetic provision that the Chancellor is making for small workshops. I heard his hon. Friends cheer; I suppose that they had nothing else to cheer. But this provision is irrelevant in relation to the size of the problem that the Government's policy will create over the next 12 months. When I contrast it with his compassion and his detailed care for those who will have to pay capital gains tax or capital transfer tax I am bound to say that I resist and resent this kind of Budget put forward in this way.
I now turn to the question of deeming. The Chancellor told us that he intends to ensure that £12 a week is disregarded in the payment of benefits to the family of a striker. I do not know whether many people know it, but strikers are already treated worse than unemployed people in terms of social security benefits. [Interruption.] Maybe it is the philosophy of Conservative Members that they should be, but my point is that strikers are already treated worse than unemployed people.
When we look at the social security benefits paid to a striker's family, we find that the short-term benefits make no allowance for the man himself, but a deduction of about £15 a week is made. The striker is £15 a week worse off than the man who is unemployed. The Government now propose to make him a further £12 worse off than the unemployed man. This is the way in which the Government will create social tension out of all proportion—[Interruption.] I sometimes wonder whether the Government know what they are doing in these matters.
With regard to the child benefit allowance, the Government have been as mean as it is possible to be in relation to their past promises and undertakings. The Chancellor told us that the allowance was to be raised to £4·75. He is of course, raising the personal allowances—although even there he is chiselling a bit away,

as I shall show in a moment. But if the Chancellor were to raise the child benefit by the same amount as the increase in inflation, the figure would have to be somewhere between £5·10 and £5·20 a week.
This is the party which said that it cared for the family. This is the Government who said that they were going over to a tax credit system. If words of mine will not persuade the Government or the Chancellor, let me quote what the present Secretary of State for Social Services said in 1977. He was explaining why the Conservatives were committed to doing this, without any ifs or buts. He said:
first, because that is the way to restore the position of families. Secondly, it is the best way to ease the poverty trap. Thirdly, it is the best way to help poorest families in work.…Fourthly, it is the best way to reduce the nonsense of people being much better off out of work. Fifthly, it is the best way of reducing the dependence of families on means-tested benefits."—[Official Report, 17 June 1977; Vol 933, c.794–95.]
There is an overwhelming case—and every Conservative Member knows it—for the undertakings that have been given to raise the child benefit to £5.20.
Although we have only just heard what the Chancellor said about personal allowances, I believe that I am right in saying that he has also chiselled in that respect. [Interruption.] Yes, he has. He has abolished the reduced rate that is paid on the first £750 at 25p in the pound, but he has not given full compensation for that by the increase in the personal allowances. If he had done so, the figures would have been rather higher than they are now. For example, he is raising the single person's allowance to £1,375. When the abolition takes place, the equivalent figure should be £1,405, not £1,375. For the married man, he is proposing to raise the personall allowance to £2,145, but he is making him worse off. He is abolishing the reduced rate of 25p and replacing it by the figure of £2,145, whereas, in order to start square, it ought to be £2,165. I note that there is no contradiction of this. The House will want to know—[Interruption.] Oh, the Chancellor said that he was chiselling, did he? I am much obliged.
Another group of people who will suffer much more are those who do not pay tax, or who have not paid tax, at more than 25p in the pound. They will suffer in two ways. First they will suffer because they will now start paying tax at 30p in


the pound instead of at 25p in the pound, and, secondly, because they are not getting the full compensation for their allowances. There can be no doubt that the Chancellor has chiselled these allowances. He has saved something here and there and has not given the full increase to which people were entitled in this regard.
I now come to the sickness and unemployment benefit and to the taxing of the invalidity benefits. These are paid when people are at their lowest ebb. It is a disgrace for a Government to increase the invalidity benefits by 5 per cent. less than the increase in the retail price index. Conservative Members must be ashamed of their own Front Bench.
Obviously, there are some points that we must welcome. The proposal that the Chancellor makes for increasing the single allowance for widows in the first year of widowhood is one in which we should all rejoice. I am sure that we are all glad about it. I also applaud very strongly the relief from taxation in the case of gallantry awards. There is also everything to be said for ensuring that the supplementary benefits reflect the full range of price increases. There is much to be said for increasing the petroleum revenue tax from 60 per cent. to 70 per cent. The provision concerning leasing ought to go, of course, and that is quite right. The proposal concerning stock relief is probably quite right, but we shall need to look at it more carefully.
Although there are several things that we can welcome in the Budget, generally speaking, it is a Budget in regard to which there are broken undertakings—the child benefit allowance is the classic example of that. It is a Budget in regard to which the Government are running the economy deliberately for a fall of about 2½ per cent. this year—and with an increase in inflation. It is a Budget which assumes that the decline will go on. It is a Budget which does nothing at all to relieve for months to come the burden of high interest rates. It is a Budget which ensures that the monetary targets and the effect of them will be swamped by the loss of output that will flow from fixing those targets where they are.
We need an approach to our problems that is entirely different from the approach set out in the Budget. My right

hon. Friend the Member for Leeds, East will undoubtedly make a further examination of it tomorrow. It is the most hopeless Budget that we have had since the war, and in regard to the social groups it chooses for rewards and penalties it is the meanest Budget that we have had since 1931.

6 pm

Mr. J. Grimond: The more I listen to Budget Statements, the more I become convinced that the future of this country lies not in the financial or fiscal proposals of the Chancellor, of whatever party, but in the structure of our industry and the state of our industrial relations. What Budgets can do in relation to those matters is limited.
It was apparent from the speech of the Leader of the Opposition that, if there is an alternative to the Government's policy, it is a statutory incomes policy. I do not share the enthusiasm which exists in some parts of the House, and in the Liberal Party, for such a policy. However, I must tell the Labour Party that that is the alternative. If Labour Members feel that the Government's measures are bound to fail, there is no other possible choice except a statutory incomes policy.
I was very glad that the Chancellor bad an idea. As far as it went, I thought that it was a good idea. The measures that he proposed to help small industries and to encourage wider share ownership were welcome. I hope that he will have another idea next year. However, I hope that he will carry this year's idea further.
I think that the future lies mainly with small industries, not with the large public monopolies, but a great deal more must be done. We need more reform on the planning procedures. We should encourage workers not only to take shares in industry, but, through co-operatives, to run industries and to employ their own management.
The Government must curse the day when the press in this country got hold of the word "monetarism". It has come to mean a sinister torture invented by Mr. Milton Friedman in Chicago. It means no more than the elementary fact that, if people have more money to spend and there is no more to spend


it on, prices will go up. Mr. Friedman did not invent that important dictum. It would be true under Socialist, Conservative or Liberal Governments.
It is certainly true that inflation will go on so long as an increasing part of this country's resources is expended on non-productive work. If that is part of their long-term thinking, I agree with what the Government are trying to do.
It must also be said that endless rises m pay, salaries and allowances of all kinds without increased productivity are the cause of inflation and poverty. They are the main trouble from which the country suffers. I consider it unfortunate that the top people in charge of the nationalised industries, many of which are far from profitable, are to get increased salaries. It is very unfortunate timing. The general clamour for higher salaries and wages is suicidal.
I want to deal particularly with North Sea oil and gas. The Chancellor mentioned this subject, but he did not tell us how it fits in with the Government's long term strategy. There is a danger that our important resources in the North Sea and the revenue from them will be wasted. It is estimated that the Government are at present getting £2 billion in taxation from oil and gas and that, by the middle of this decade, that figure will rise to about £18 billion or £20 billion. That is about half the yield of income tax and is by far the most striking feature of Britain's financial position.
What is to be done with these resources? I fear that they will be frittered away. It has already been claimed that, by selling off assets, the Government will be able to reduce public borrowing. There is a danger here of confusing capital and income and of using capital assets to reduce the calls upon income. Then there is always the danger that the revenue will go into the Exchequer and be used for general purposes—possibly to assist in reducing taxation and to excuse the Government from undertaking the cuts in non-productive expenditure, to which they are committed and which I think are essential for the future of the economy.
I hope that we shall be reassured that the oil revenue will not be used as a cover to excuse the Government from carrying out reductions in public expenditure on which I hope they will keep

their mind focused. These excellent Blue Papers are produced, but they are not always put into practice as readily as promised lead one to hope. Of course, this revenue could be used to bribe the electorate by making reductions in taxation and using it for many other purposes.
Three purposes should be considered. First, Mr. Brittan and Mr. Riley have suggested that a North Sea stock should be issued so that people would feel that they had gained some advantage from our huge resources in the North Sea. There are objections too, but also great advantages in, that idea. I believe that individuals will make better use of it than Governments. It will also give the public the idea that they are gaining from their own asset.
The second purpose is to set it aside as a special fund at arm's length from the Government and use it for productive investment. I do not think that the British economy suffers purely from lack of investment. Much more serious is the failure to make good use of the investment that we have. We pour money down the drain of the nationalised industries in the name of investment and waste it. However, if we could be sure that the investment would be profitably used, we could do much more with it. I believe that we should reserve some of our North Sea revenues for that purpose.
Thirdly, it could be used to reduce the cost of energy. The Government's proposal on this issue is the exact opposite: that energy should be made more expensive as a method of conservation. I object to that. I deplore the increase in the petrol tax. Those who live in the countryside, who already pay an enormous price for petrol, will resent this increase. I cannot see the point of increasing petrol tax at this point. There is a certain tendency—from which I hope the Government do not suffer—to look at prices which have not gone up since 1977, for instance, and therefore decide to put them up now. I see no reason for increasing taxes because they have not been increased for a long time.
The least conservation conscious elements in our society are public authorities. Public buildings are over-heated. There is no sign that authorities are economising in the building of new public offices or schools. Schools are still being built which, even at present-day prices,


will require £70,000 a year to heat and light.
There is no reduction in the use of cars. Most private cars are either on expense accounts or are used by officials. Will Ministers and officials now have to pay tax on the cars which I understand they get free and untaxed? Fishermen in my constituency who travel to ports have to pay tax if they get any free transport either by sea or by road. I cannot see any difference between them and Ministers and Government officials who are not taxed.
The most striking waste of energy is the flaring of gas. Enormous quantities of gas are flared off every day from platforms in the North Sea and the terminals on shore. No attempt is made to use that gas for generation of electricity. Hydro boards and gas boards in Scotland have made no serious effort to use it.
In my constituency alone some 3 million cubic feet of gas is flared off daily. For the North Sea as a whole the figure is about 487 million cubic feet. People read in the press about the waste of gas, and find it strange to hear talk of economies. The Gas Board is proclaiming that rises in the cost of gas are "inevitable". They are not. There is no reason why we should follow world prices. The Gas Board makes a huge profit, as do to a lesser extent the hydro boards. It is exasperating, at least to my constituents, to read these advertisements of increased gas and electricity prices when such large quantities of gas are burnt in the air every day.
I beg the Government to tell us more about their long-term policy for North Sea resources. I trust that those resources will not be frittered away or used as an excuse by the Treasury for not taking action in other ways. Efforts should be made to use products such as the flared-off gas.
We should not be taken in by talk of an inevitable oil and energy shortage. The reserves in the North Sea are enormous, and there are probably new fields to be discovered. We have huge reserves of coal. We are in danger of being conned into the belief that there will be a total energy shortage. By the time that coal is exhausted, we shall surely be using solar energy. Although there may be

problems in the medium term, I am less pessimistic about the long term.
I hope that the Government will not lose sight of that important aspect of our economy over the next 10 years. I am not confident that they have yet thought out their future policy for North Sea oil and gas and for the large and ever-increasing revenues that will come from the North Sea.

Mr. David Knox: I am grateful for the fact that I have been called to speak at this early stage. As the first Conservative Back Bench speaker, I join the Leader of the Opposition in congratulating my right hon. and learned Friend the Chancellor of the Exchequer on the delivery and content of his Budget speech. It was a long speech, but not boring, as most Budget speeches have been over the 10 years that I have listened to them.
My right hon. and learned Friend has been Chancellor of the Exchequer for 11 months. He introduced his first Budget shortly after he came to office. This is his second. He has had only two Budgets in 12 months. Had the right hon. Member for Leeds, East (Mr. Healey) been Chancellor of the Exchequer, we should have had at least half a dozen Budgets in the same period.
Overall, the Budget is less bad than we were led to believe from press leaks in recent weeks. I welcome the increase in the retirement pension. We are well aware of the problems faced by the elderly who have to live on limited fixed incomes at a time of high inflation. I believe that all hon. Members are delighted that full allowance has been made in the retirement pension increases for inflation over the past 12 months.
I also welcome the 18 per cent. increase in personal tax allowances. Last year's reductions in direct taxation will therefore not be lost through inflation.
I also welcome the abolition of vehicle excise duty on the electric car, which will contribute to energy conservation. I hope that Treasury Ministers will consider incentives for those developing the electric car.
The enterprise zone concept is attractice. It is no more than an experiment, but I hope that it will be successful and


play a substantial part in regenerating our inner city areas.
I regret the limited increase in child benefit. It is a good benefit that helps the poor and encourages hard work. I am sorry that my right hon. and learned Friend did not feel able to go further.
I regret even more deeply the decision to end earnings-related unemployment benefit. It is a good benefit and particularly important at a time of rising unemployment. I appreciate that many people are covered in other ways. However, it is difficult for a person who becomes unemployed suddenly to cope with a considerable drop in income at the beginning of that period. It may be easier after some months. That benefit also helped to promote greater mobility of labour. It enabled people moving from one job to another to have a reasonable income during that period. We have a problem in our lack of mobility of labour, and earnings-related unemployment benefit has played a part in improving this situation.
The general state of the British economy is worse today than 12 months ago. The annual rate of inflation is 18·4 per cent. as against 9·3 per cent. 12 months ago. The number out of work is 1,470,000, as against 1,455,000. The annual rate of economic growth is 1·7 per cent. as against 2·7 per cent. 12 months ago. Before the Labour Party claims that that is the fault of this Government, it is important to note that there is a time lag of 12 months or more between taking actions that affect the economy and those measures taking effect. The previous Government are responsible for our serious economic plight. It is the consequence of their actions, not the actions of this Government.
But this Government have been in office for almost 12 months now, and increasingly over the next few months the various economic statistics will represent the consequences of this Government. It is no secret that I have grave reservations about monetarism and even graver reservations about the excessive reliance that the Government place on it. This is not to deny that monetary policies have a part to play in economic management, but for a number of reasons I do not believe that monetarism is a panacea for all our economic ills.
First, it is difficult to quantify the exact

increase in the money supply. Secondly, any measure of money supply inevitably excludes an increasing number of transactions which have economic significance but which do not involve the use of money. Thirdly, it is not possible to know in advance exactly what the velocity of circulation will be. Relatively small upward or downward movements can be significant.
I make these points not because I believe that monetary policy is unimportant but because it has severe limitations. It is expecting too much of monetarism that on its own it will cure inflation and resolve our economic problems. We need to use every available economic tool to achieve such objectives, including fiscal and incomes policies. To place the reliance which the Government do on controlling inflation and the economy by controlling the money supply seems to me like putting all one's eggs in a basket which almost certainly has biggish holes and which one is not totally certain has a bottom.
If there is to be an improvement in British economic management and in our economic performance it is important that the Government should use all the tools of economic management. Although my right hon. and learned Friend gave no indication of it earlier, I hope that as the Budget debate proceeds other Treasury Ministers will indicate that the Government intend to use the other economic tools of management that are available.
I turn to a consideration of the exchange rate, which is related, to some extent, to what I have been saying. There is little doubt that the current level of the exchange rate is damaging our industrial base. It is sustained by high interest rates and oil revenue. In terms of manufacturing costs, it is at an unrealistically high level which makes it difficult to export British products and much too easy for foreign products to be competitive in the British domestic market. Consequently, British manufacturing industry is losing ground, both at home and abroad.
That is hardly surprising when one considers that our currency stands, in real terms, 10 per cent, higher than before the 1967 devaluation of the pound. It is important that action should be taken to adjust the exchange rate so that


it is at a more realistic level in terms of manufacturing costs.
That could be done by reducing interest rates—of course, it would he easier to do that if we were not so dependent on monetary policy—and by encouraging capital outflows to ensure that the short-term revenue from oil is replaced by long-term revenue from overseas investment.
In the short term, as my hon. Friend the Member for Loughborough (Mr. Dorrell) suggested in an article in The Observer on Sunday, this outflow could be created by speeding up the repayment of some Government overseas debts.
However, a readjustment of the exchange rate is not enough. It is in our interests and in the interests of world trade that we should move back towards a more stable international monetary system, with fixed but flexible exchange rates again. There is little doubt that the stability of the international monetary system in the 25 years after the war contributed to the post-war expansion in world trade.
The system of fixed exchange rates which was worked out in Bretton Woods in the mid 1940s provided an environment in which international trade could expand. Britain benefited particularly from that, because of our dependence on trade. Unfortunately, in recent years, the Bretton Woods arrangement has broken down and we have gone back to floating exchange rates. The stable conditions necessary for the maintenance and expansion of world trade no longer exist. As Britain has to export about one-third of its national income to pay for imports, the change has not been in our interests.
Unfortunately, a new worldwide agreement on the lines of Bretton Woods, desirable though it may be, is not even on the horizon. The best that we can hope for is an arrangement on a regional basis. For Britain that means in the EEC as members of the European monetary system.
It would be in Britain's interest to join the EMS, particularly if our exchange rate were fixed at a more realistic level. I hope that the Government will give serious consideration to Britain joining the EMS and that we shall do so soon.

If we were to join. I suspect that our budgetary problem with the EEC would be easier to solve.
I said earlier that I thought that we should use every available tool of economic management. That includes an incomes policy. I have never believed that incomes policies could achieve perfection on their own, but then I do not know of any policy that does so.
Nor have I been blind to the defects of incomes policies. I recognise fully that incomes policies introduce a degree of rigidity into the labour market and that they tend to squeeze differentials and consequently weaken incentives for upper and middle management. I also recognise that inherent in any incomes policy is the possibility of confrontation between the Government and a powerful trade union.
However, I find it impossible to believe that home-generated inflation in Britain in 1973 would have been the lowest in any OECD country without the incomes policy of the then Conservative Government. I also find it impossible to believe that inflation would have been reduced from 25 per cent. in 1975 to just over 8 per cent. in 1978 without the incomes policy of the Labour Government.

Mr. Alan Clark: My hon. Friend is keen on incomes policies. Will he tell us whether he thinks that they should have the force of statute or simply be by invitation?

Mr. Knox: It depends on the circumstances obtaining at the time. I should prefer a statutory incomes policy in certain circumstances, but in different circumstances I should prefer a voluntary policy.
I am certain that we need some form of incomes policy. Such policies have a useful role to play. That view is further substantiated, because I do not believe that free collective bargaining is possible in the labour market in Britain today. It is neither free nor is it bargaining. It is the naked use of monopoly power in the labour market, with the biggest rewards going to those with the greatest monopoly power.
In my view, that monopoly power cannot be broken, for political and social reasons, and, on the evidence, I do not believe that economic measures are


capable of weakening it. An incomes policy applied fairly to all could help to moderate wage and salary increases, which are the consequence of the use of that monopoly power and, in so doing, would reduce cost inflation.
I hope that the Government will give serious consideration to the introduction of an incomes policy. There is no doubt that the present situation is serious. Over the past 12 months earnings have gone up by about 20 per cent., compared with an increase of less than 12 per cent. in the previous year. Since I do not expect any increase in output over the next 12 months—I gather that that is also the view of the Chancellor of the Exchequer—it means that we shall still have pretty high inflation a year from now.
From time to time the Government have stated their opposition to an incomes policy, but they have said that they might, in certain circumstances, introduce a freeze. A freeze is all right if inflation is in single figures, but it is not on if inflation is running at a rate of 20 per cent.
The Government should enter into negotiations with the trade unions and the CBI with a view to getting an agreement on a maximum percentage increase in the next wage and salary round. I am not certain what the exact figure should be, but I imagine that it would have to be between 10 per cent. and 12 per cent.
I know that critics of incomes policies argue that any good that they may do is undone at the re-entry stage, when free collective bargaining is resumed. I have never understood the logic of that criticism, because it seems to be an argument for continuing an incomes policy rather than for abandoning it. In view of the seriousness of the present situation I ask the Government to look again at the whole question of incomes policies, and to do so with an open mind.
I am sorry if some of my remarks have been critical, but I should like to assure my hon. Friend the Financial Secretary to the Treasury, who is sitting on the Government Front Bench, that my remarks have been offered in a constructive and not a destructive spirit. Like him, I am concerned about the future strength of the British economy.

Mr. Jack Straw: I wish to thank you, Mr. Speaker, for calling me so early in the Budget debate. I congratulate the hon. Member for Leek (Mr. Knox) on a courageous and perceptive speech, though I fancy that it is not the sort of support that Ministers were hoping for.
This is a vicious and wicked Budget, and the callousness with which the Government have disregarded the consequences is best illustrated by the fact that among all the welter of figures that we heard there was no mention of the consequencies of the Budget on unemployment levels this year and next year, despite the fact that The Economist intelligence unit, using the Treasury's own working model was predicting that unemployment would rise to 2,100,000 next year and 2,450,000 in 1981. For a Government who preach the idea of open government it is curious that when comparing last year's Red Book, which was not effusive in its figures, with this year's one sees that there is a major omission in the table on page 27. Last year the Government at least had the honesty to give us a figure about the level of manufacturing production, which was forecast to go down by 2½ per cent. This year, looking at the table on page 27, I note that no figure is given for manufacturing production. If there is an explanation for this, I shall be happy to give way to the Financial Secretary. I fancy that the explanation is that the Government know that manufacturing production will decline so much that they do not want to admit just what the figure will be.
During the speech of the Chancellor of the Exchequer we heard a good deal about the need to create incentives. We heard the same last year. It is instructive to compare the words of the Chancellor with the cold print of the Red Book that was produced last year, to see just who is right. The Chancellor told us last year that his Budget was:
designed to give the British people a greater opportunity than they have had for years to win a higher standard of living—for their country and for their families as well as for themselves. I dare to believe they will respond to the opportunity that I have offered them today".—[Official Report, 12 June 1979; Vol. 968, c. 263.]
When one turns to the forecasts in the Red Book, one sees that what was offered was very different. Instead of opportunities and incentives we were told that


there would be a decline in the GDP of 1 per cent. and in manufacturing production of 2½ per cent. Who was right? Before saying who was right it is worth making the point that in his last desperate effort to ensure that hope at last could triumph over experience the Chancellor, in a commentary to the Red Book, dismissed these forecasts. He said:
The forecasts are largely based on economic relationships fitted to the historical data of the last 10 or 15 years…it remains a possibility that large changes in policy will affect the economy in ways which are not foreseen. It is particularly difficult to take account of possible changes in confidence and expectation or, for the slightly longer term, of the effect of incentives on supply side relationships.
The truth is that in this battle between the dreamland that the Chancellor seems to inhabit and the colder reality of the Treasury's computer, the computer won hands down, because the forecasts, far from being wrong or over-pessimistic, were understated, as hon. Members will be able to see by looking at the tables in the Red Book. On every indicator, comparing the forecast last year with outturn to date, the forecast was either on target or the outturn was worse, and that applies especially to imports and the level of inflation.
The situation has become worse partly because the recession is a good deal worse but also because the Government have added to that recession by their deflationary policies. At the root of the difficulties that the country now faces and the policies of the Government producing these difficulties is the Government's obsession with the money supply and, above all, the level of the public sector borrowing requirement.
The hon. Member for Leek said much of what I would have said about monetarism. Having read the recent consultative document on monetary control, I was astonished to hear the words of the Chancellor this afternoon. Though Government officials in the Bank of England evidently understood that the relationships between the money supply and inflation were very difficult and complex to measure—there are references to that in paragraphs 3 and 6 of the consultative document—it was perfectly plain that the Chancellor had a simplistic view of these relationships. He believes that if he can control the money supply inflation will

fall, without any serious or adverse consequences.
Worse than the direct obsession with the money supply is the Government's belief that the level of the PSBR is the key to the level of interest rates and that in order to reduce interest rates and reestablish profitability in manufacturing industry large cuts in public expenditure are required. Of course, the level of the PSBR has some effect on the level of interest rates; no one would deny that. But the relationship is less definite than the Government would have us believe.
In a perceptive article on 9 March in The Sunday Times, Malcolm Crawford, the economics editor, who in the past has certainly been no friend of the Labour Party or Labour Governments, said:
A high PSBR has not raised interest rates except very briefly. Indeed, according to the Bank of England's model of the financial system, a rise in the PSBR of 1 per cent. of GDP moves interest rates by less than 0·2 per cent.
He goes on to say:
but even so, it supports the contention that the effect is small.
Earlier Mr. Crawford had said:
but Ministers and the Tory back-benchers who are prodding them greatly exaggerate the effect of Government borrowing on interest rates.
I hope that Ministers will look carefully not so much at what Mr. Crawford had to say but at what the Bank's own economists had to say about the relationship between the PSBR and interest rates, because it is clear that they have not taken full account of it.
What is affecting the level of interest rates—and what has undoubtedly done so during the time that this Government have been in office—is the establishment by the Government of money supply targets that are totally out of phase with their fiscal policy and inflationary expectations. That led the City to believe that those targets would be exceeded and that interest rates would be forced up as the result of the establishment of those unrealistic targets. If anyone is to blame for the level of interest rates it is the Government, because of their simplistic monetary policy.
In their defence of Government policies over the last year we have heard repeatedly from the Prime Minister, the Chancellor of the Exchequer and the Paymaster General—who, I think, is living


proof that there is life after death—that there is no practical alternative to the present policies of the Government. Indeed, the Chancellor today described those policies as necessary. He said that there was no real alternative to the policies that he had outlined.
It is curious that having been elected on the basis of offering a new choice to the country, and that there was a different way, the Government now claim that there is no choice and that there is only one course to follow. In my view nothing is more pernicious, subversive or more destructive of a democratic society than to deny that there are alternatives and choices. Unquestionably there are choices. This afternoon the Conservatives have chosen a road that will lead to more bankruptcies, rising unemployment, increasing poverty and open class warfare. This afternoon we had the meanest and most wicked budget that we have had since the 1930s As I said earlier, if Conservative Members do not believe that, they should look at the forecasts for unemployment that The Economist intelligence unit has already produced. That forecast predicts a rise of about 1 million within the next two years.
Lest there is a belief on the Government Benches that there is no real choice, let me briefly tell the House of two runs on the Treasury's economic model which my hon. Friend the Member for Battersea, South (Mr. Dubs) and I did with the help of the Library and The Economist intelligence unit over the last month. Both those runs illustrate that there are alternatives that even this Government could follow.
I will deal first with the more contentious run, which is the imposition of import controls. Under this simulation we placed a tariff of 20 per cent. upon half the imports of manufactured goods. We also assumed an incomes policy of earnings of 13 per cent. in 1981, 11 per cent. in 1981–82 and 9 per cent. in 1982–83. Given the push on the balance of payments that import controls provided, we expanded the economy in this simulation by £2½ billion in 1980–81 and by a further £2½ billion in the two years followed.
What emerged from the simulation was that as a result of this, unemployment would have been reduced from the base

level that I have mentioned by 130,000 this year, by 400,000 next year and by 750,000 the year following. For those who say that retaliation is a major problem—I do not deny that it is some problem—the interesting thing about the simulation was that the absolute level of imports was no less by 1982 than it would have been under the run-on present policies.
Then we fed in a simulation of the position in which the country would be today if my right hon. Friend the Member for Leeds, East (Mr. Healey) had been Chancellor and had produced a cautious and pessimistic Budget last June. We accepted that whether or not we liked it he would probably have increased VAT to 11 per cent., would not have reduced income tax, and would have cut public expenditure. Even so, the simulation indicated that unemployment would be 73,000 less today than it is under the present Government's policies, 233,000 less next year, and about 400,000 less in 1982.
If any hon. Member wants copies of these simulations, my hon. Friend the Member for Battersea, South and I will be delighted to provide them.
I mention those simulations to bring out the fact that there are real choices available to the Government. Let us therefore hear no more from the Government that they had no choice other than to pursue these policies, because that is the last refuge of the bankrupt. Of course the Government have choices. The present Government have chosen to make the rich richer and the poor poorer. They have chosen to break the power of the trade unions, which are the only institutions left to defend the interests of working people.
In pursuit of those policies, the Government have chosen measures that are more hateful and more evil than any that we have seen since the war. When economic disaster and social breakdown in many areas are the result—and they will be—let Conservative Members turn not to others to whom to attach blame, for the responsibility for the economic and social chaos and destruction that will follow from these policies will be theirs.

Mr. James Hill: I congratulate my right hon. and learned Friend the Chancellor of the Exchequer


and his Treasury team on a most courageous Budget. It is a Budget that the country was expecting. At no time have we pulled our punches. We have told the country exactly what the necessities are.
The brink over which the country could well slip has been at least pushed further away. When the Chancellor opened his speech with the statement that the Government cannot spend their way out of trouble it was obvious to all those on both sides of the House who have common sense and a feeling for the national situation that they would be the first to agree that the public sector borrowing requirement has been too large, has in some years run red-hot with promissory notes—not only the Clegg report but many other promissory notes that were in the pipeline—and that the Chancellor had taken a very courageous stand in hoping that in the 1980–81 period the PSBR would be able to be contained at £8½ billion.
All the cuts, of course, whether real or fictional—the local and national newspapers have fictionalised some of them—cause concern to many constituents of Labour, Liberal and Conservative Members.
The forecast growth of 1 per cent. per year for the next three years must mean that there will be a time during which we must all make sacrifices, and sacrifices only with the hope that the future will be brighter. I think that the Chancellor was wise not to forecast any lights at the end of the tunnel in 1980. He laid it on the line that forecasting this 1 per cent. growth was better than, as in the past—and Chancellors of both major parties have done this—talking about 2½ per cent., 3½ per cent. or 4½ per cent. growth figures and misleading hon. Members and the country.
Of course, the Chancellor is obligated. There is social concern—we all get evidence of that in our postbag or through the advice services that we give—about social benefits and our social security system. However, I was glad to read that the Chancellor expects an increase of 4 per cent. in social security payments over the years up to 1983.
We are all concerned about overstaffing, not only in the Civil Service but in local authorities. I was very glad to hear that

the cost of the Civil Service was only one-fifteenth of total Government expenditure.
The message must go out from this House loud and clear from all Members, of whatever political colour, that local councils cannot spend when the rest of the community are having to cut, and they cannot increase their staff when the sheer necessity of containing the PSBR means that surplus staff must be phased out in the most humane way.
The promise to pensioners was well received by the House. There was some laughter from the Opposition Benches about the £10 Christmas bonus, but probably Opposition Members who laughed were not aware of how desperately this bonus was missed and how positively people react each Christmas to what may seem to some hon. Members to be a matter of merely a small bit of paper but what to them, as pensioners, means the added few luxuries that give them the feeling that it is Christmas and they are not being neglected. I do not think that I can state too often that any genorosity to pensioners is more than reciprocated in their good will to politicians of all denominations. Therefore, I was rather astounded that there was laughter at that stage.
We have had a lot of laughter this afternoon. The Budget was not of a sort that created complete gloom. The only gloom that I could detect was on the faces of some Opposition Members when it was announced that there was to be an extra 2p on a pint of beer, which created a certain ripple, an extra 8p on wine and an extra 50p on whisky.
I am not sure whether I caught the feeling of Conservative Back Benchers, but I felt that these were very moderate increases. We were expecting more. We thought that in this respect the Chancellor had not got the pulse of the country. During my right hon. and learned Friend's speech I said to one of my hon. Friends that there did not seem to be a real hair shirt in the whole Budget. We were expecting to be forced to wear some such garment, which would create a great deal of discomfort. However, I do not think that anyone, even heavy imbibers of alcholic spirit, can say that the Chancellor has today been unnecessarily harsh. As a non-smoker, I would probably have appreciated a


little more duty on cigarettes, but a 5p increase, again, seems to be very moderate.
I certainly support the Chancellor in taking at least two and a half times more of the profit made in casinos, because I feel that they do not help the social farbric of our society. At times I think that they destroy some of the finer elements in our society. If people lose vast sums of money in casinos it could well bring heartbreak to their families.
I was expecting a greater increase in the vehicle excise duty. It has been £50 for a considerable time, and I expected it to be increased to £75. My right hon. and learned Friend has taken a moderate line. for which we are all grateful. Those of us who love to drive must be affected by the extra 10p per gallon of petroleum essence. However, that increase is surely better than a rationing programme that could be abused by all types, and create a black market influence.
I am fairly happy with the private car excise duty, but I am slightly worried about any further increase in the duty payable for heavy lorries. I know that they are considered to be the bad boys on the roads these days. However, they play a useful part in our economy. They provide transport in areas where there may be no other form of transport. The operators suffer excise duty on the petroleum or oil fuels that they use. I hope that in future Budgets the Chancellor will not continue to increase taxation on lorries that are used on our roads. That policy goes against the small business man who runs only one or two lorries and who is a useful part of our transport system.
We had a bit of a laugh about the Chancellor's decision to levy no duty on electric cars. I do not think that many electric cars come into the House of Commons car park, but there may be some, for all I know. However, my right hon. Friend is thinking along the right lines for the future. Any proviso that will help us to move away from using energy sources that in many instances have to be imported can do only good. The same can be said for anything that increases the possibility of having the electric car in the future.
We used to have a lower excise duty on liquefied petroleum gas. I know that not sufficient liquefied petroleum gas was

produced to keep all our cars on the road. I had a car fitted with the means of using liquefied petroleum gas. Its use became a commercial possibility because the duty payable on the gas was only half that payable on petrol. However, the duty was increased and increased. Liquefied petroleum gas has been priced away from the man who might have used it.
The moment of discord was registered most when my right hon. and learned Friend stated that social security payments to the families of strikers would be adjusted, as it would be deemed that each family had received £12 per week from some other source. I accept that £12 is a lot of money. However, my right hon. and learned Friend said that taxpayers have paid out about £8 million during the present steel strike. It would be interesting to know how much has been paid out in the form of supplementary benefit to support strikes over the past five years. The total might raise a few eyebrows.
It is apparent from my postbag that there is a feeling that the striker has a duty to provide at least in part for his family. My right hon. and learned Friend will obviously receive much stick over this issue, but I do not think that that will be in line with public opinion. I feel sure that public opinion is that a responsible trade union which calls out its members on strike should pay some of the burden of maintaining the strikers and their families.
My right hon. and learned Friend has brought forward two imaginative schemes. I, in my urban seat of Southampton, welcome both of them. I especially welcome the small workshop scheme. There are many small business men working in converted garages, in lofts or in lean-tos on the sides of their house. They desperately need small units of between 1,000 sq ft and 3,000 sq ft. Anything that will provide an allowance along the lines that my right hon. and learned Friend has in mind should be viable for the small business men in my area, and I should welcome it.
The proposal to introduce enterprise zones is even more imaginative. Some years ago, when there was a Labour Minister of Transport, I was chairman of Transport for Europe. I tried to talk the Minister into forming a customs-free


zone—the House will never guess where—in Southampton, of all places. My idea was that ships from all over the world with their container traffic would come into the customs-free zone and, as it were, restuff the containers in Southampton for distribution throughout the rest of Europe. It seemed on the surface to be a progressive idea and a necessary provision. However, it was not received with any great acclaim.
Now, if I understand my right hon. and learned Friend aright, we are to have enterprise zones. I think that he may have sized them too large. After all, 500 acres is a bit too much for most cities. There are very few parcels of 500 acres in the middle of our cities. In Southampton I doubt whether we have more than 100 acres that could be used as an enterprise zone.
I am sure that my right hon. and learned Friend has already investigated the six sites. If he does not find the right sites he will no doubt think further of smaller parcels of land for smaller enterprise zones.
I diverge from the Treasury team on the constant need to reduce the standard rate of tax. It is proposed to simplify it again. The lowest rate is now 30p. The Treasury has told me in the past that it would like it to be 25p.
In 1974 the then Conservative Government were keen on the abolition of the domestic rate. It is a most unfair tax. It could be phased out over a number of years. I received replies to written questions and it seemed that if it were phased over five years the total requirement would be an additional 5p or 6p in the standard rate of tax.
As the economy becomes more and more balanced, as I am sure it will after the Budget, there is no reason why we should not begin to think of a phasing out of domestic rates over a period of years, so that there is an obligation on the next Government to continue the phasing I am talking of only about one-sixth of the total rateable income of a city, and if my right hon. and learned Friend were to look in that direction I should be happy to support him in his next Budget with even more fervour than I have today.
Thank you very much, Mr. Deputy Speaker, for extending your courtesy to

me. However, I think that my time is running out. I have been told to keep talking for a few more seconds, as everyone has enjoyed my speech.

It being Seven o'clock, and there being private business set down by The CHAIRMAN OF WAYS AND MEANS, under Standing Order No. 7 (Time for taking private business), further Proceeding stood postponed.

STEVENAGE DEVELOPMENT AUTHORITY BILL (By Order)

Order for Second Reading read.

7 pm

Mr. Stanley Newens: I beg to move, That the Bill be now read a Second time.
It was originally hoped and expected that the Bill would be introduced by the hon. Member for Hertford and Stevenage (Mr. Wells). Stevenage borough council, which is promoting the Bill, approached the hon. Gentleman and discussed its contents and aims with him at great length. Eventually, for reasons which the hon. Gentleman will no doubt explain, he declined to undertake the task. It was only at that point, and with considerable regret at the hon. Gentleman's decision, that I accepted the council's invitation to take over the responsibility for Second Reading.
It is important to make clear at the outset that the Bill has received considerable support right across the political spectrum in Stevenage. When it came before the borough council on 19 December 1979, the resolution to promote it was passed. Thirty-four councillors and the mayor voted in favour, and only one councillor voted against it. The majority of the small Conservative group on Stevenage council supported the Bill. Since then, not only the Labour Party but also the Liberal association, the Chamber of Trade, the Council for Voluntary Services and 15 to 20 other organisations have passed resolutions backing the Bill. In addition a petition in favour of the Bill, which has been signed by more than 10,000 residents from all political parties and from all walks of life is still gathering support.
This all-party support for the Bill is not surprising. It is not a doctrinaire measure, but a practical attempt to secure


the future development of the town in an orderly manner, by providing for the community to retain some of its key industrial and commercial assets in public ownership. At present those assets are in public ownership through the development corporation. The alternative is that those assets will be sold off as investments to outside organisations in accordance with the Government's policy.
As I endeavoured to point out when I raised the issue yesterday on a point of order, the Secretary of State made clear on 12 December that the Bill is in conflict with the Government's policy of sales. As I explained at that time, there is considerable dubiety—to say the least—about whether the Minister has legal power to require sales or that the development corporations have the legal power to implement them under section 18(1) of the New Towns Act, 1965. That Act defines the Minister's power and that of the development corporations. According to the legal opinion that we have received, new town assets can be sold only
for securing the development of the new town in accordance with proposals approved by the Minister under Section 6(11) or for purposes connected with the development of the new town.
The Secretary of State's policy of demanding the sale of assets is contrary to the original new New Towns Act, contrary to the New Towns Act 1959 introduced by the Conservative Party, and contrary to the obvious interests of the community in Stevenage. In addition, that policy is of dubious legality. Some may think that this is an extreme measure. However, it is largely modelled on the Letchworth Garden City Corporation Bill 1962, introduced by none other than the 29th Earl of Crawford, then representing Hertford as a Conservative in his earlier incarnation of Lord Balniel. Perhaps some hon. Members will claim that he was a red mole, working within the Conservative Party. I regarded him as the sole of moderation.

Mr. Tristan Garel-Jones: Can the hon. Gentleman confirm that the Letchworth garden city was built and financed by private money?

Mr. Newens: The Stevenage Bill follows the lines of the Letchworth Bill in most respects. There is no difference in that respect.
Lord Balniel, as he then was, explained

on Second Reading of the Letchworth Garden City Corporation Bill on 20 March 1962 that the concept of garden cities—on which the new town ideal was, and still is, based—originated in a book written by Ebenezer Howard, "Garden Cities of Tomorrow". Among his backers in 1903 at the inception of Letchworth were the then Lord Salisbury and A. J. Balfour. They are hardly figures of revolutionary Socialist inclination.
Lord Balniel informed the House that
This assumption that the freehold of a town should pass to a public body acting as a trustee for the community has been absolutely basic to the existence of this company since 1903."—[Official Report, 20 March 1962; Vol. 656, c. 292.]
The Letchworth Garden City Corporation Bill was prompted by the fact that a property company, the Hotel York Ltd., had obtained a controlling interest in Letchworth. As Lord Balniel pointed out, the aim of the Bill was to vest the assets in a public body. That is precisely the purpose of this Bill. Among those who voted in favour of the Letchworth Bill in 1962 were the right hon. Member for Cambridgeshire (Mr. Pym), now Secretary of State for Defence, the present Home Secretary, the former hon. Member for Chigwell, now the hon. Member for Epping Forest (Mr. Biggs-Davison), the hon. Member for Folkestone and Hythe (Mr. Costain), the hon. Member for Rutland and Stamford (Mr. Lewis), the late Iain Macleod and many other Conservatives, some of whom still sit in this House.
However, the Letchworth Garden City Corporation Bill sought to vest in public ownership assets already controlled through a company by a private organisation. Tonight the Bill merely seeks to retain in public ownership assets that are already publicly owned. I stress to the hon. Member for Watford (Mr. GarelJones) that the Bill is more moderate than the original Letchworth Garden City Corporation Bill.
As indicated in the preamble, the Bill provides for the establishment of a Stevenage development authority, which—as set out in part II—would be a body corporate and would consist of seven members. Two of those members would be appointed by the Secretary of State, four by the borough council, and one by the county council. I accept that there are certain differences from the Letchworth


Garden City Corporation Bill in that respect, but as the development authority would have powers to precept the Stevenage borough council the fact that it has a majority would act as a safeguard for those who are concerned about the possible financial burdens on townspeople. I shall come to this point a little later in my speech.
Part III of the Bill provides for the transfer of interests which are defined in part I—that is, basically the freeholds or other interests in freeholds of industrial, commercial or other properties within the designated area on 19 October 1979. It provides for the transfer of these to the new authority on terms that are defined in clause 15 of the Bill, that is, at a price—and I quote:
which the undertaking and included interests might have been expected to realise if they were sold as a going concern on the day of transfer in the open market by a willing seller to a willing buyer
to be determined by agreement between the authority and the development corporation or commission, with appeal to the Lands Tribunal in the case of a failure to agree.
In other words, the assets would be transferred at market value and there is no question of the new authority getting them on the cheap. The new authority would have to raise the money to purchase those assets. In that respect there is nothing in the Bill which is essentially different from what was done in the Letchworth Bill.
In part IV, clause 22 gives the Stevenage development authority powers to borrow money for the purchase of assets. Clause 23 provides for the authority to act as if it were a local authority on the question of loans. The Bill sets out that there is no need for loan sanction in the case of the acquisition of the assets. But it is also perfectly clear that the new authority would not be able to waive loan sanction in any other respect than for the acquisition of assets to which this Bill relates. There is no question of wide powers being granted to the authority for waiving loan sanction. It would he able to do that only in order to carry out the purposes explicitly laid down in the Bill.
Clause 24 enables the borough council to lend money to the authority and to raise money, by borrowing, for this pur-

pose. All the moneys borrowed must normally be repaid within five years.
Clause 25 defines the put poses to which the authority may put the revenue it receives. It also provides for the eventual surplus, after all loan charges and other expenses have been met, to be devoted to traffic and transport facilities, lighting, drainage, markets, libraries, baths, education, welfare, recreation and amusements. In other words, it provides for all aspects which would benefit the community of Steveage. That is the purpose of the Bill.
Clause 26 sets out what occurs in the case of deficiency. The local authority may contribute towards meeting that deficiency, or the development authority has powers to precept it. But, as I pointed out earlier, the fact that the board itself would have a majority of nominees drawn from the council means that the authority could not, in effect, precept the council without very close liaison on any issue on which deficiency had taken place.
It is not necessary for me to discuss at great length the rest of the Bill in detail. But I wish to turn to some of the financial implications. On one side there has been criticism that Stevenage would be taking over assets which might be used to finance other new towns or for other national purposes. On the other hand, there are people who argue the exact opposite. They say that a heavy financial burden would be imposed on the people of Stevenage if the Bill went through.
The borough council's director of finanacial services has prepared several forecasts, based on different assumptions of future inflation and interest rates. There are many other variables which would need to be taken into account, but in the course of a Second Reading speech it is impossible for me to cover all the different aspects which could be created. I can only take one or two as examples. None the less, I assure the House that all the financial implications nave been carefully considered.
If inflation runs at 10 per cent. and interest rates average 13 per cent. over the next 20 years—I have my doubts about that, but I shall take those figures for argument's sake—the authority might levy a precept of 4p in the pound on the borough council, which would add 18p to


20p a week to the rates of the average Stevenage household. That would enable the borough council to build up aggregate profits over a period of 20 years of about £60 million. In year 20 the annual rate of profit would be about £11 million. If no precept were levied, the profits would be £55 million over a 20-year period. Even if there were no inflation at all and no increase in rentals—and I think everyone would agree that that is highly unlikely—the surplus would still be £16 million a year by year 20.
The revenue that the new authority would take in would increase according to the amount of inflation but would be decreased by the increase in the level of interest rates. A calculation based on an average interest rate of 15 per cent. still provides for an annual surplus of about £6 million by year 20.
Basically, the authority would face a heavy interest burden on loans in the early years of its existence which it would have to meet from a number of sources. It would meet this burden from revenue received, from rolling over the interest as provided for in clause 23 in accordance with the 1972 Act, and from the sale of some of the property that it had acquired.
It is important to emphasise that Stevenage council is not adopting a doctrinaire line about the sale of freeholds to existing employers in the town. The Secretary of State has made great play of the desirability of widening ownership, but the fact is that not many people in new towns who are involved with industrial and commencial assets are clamouring to buy. Many small business men have found themselves entirely crowded out. Small business men are frequently tenants in blocks of properties and are not offered the option of buying their own particular tenancy. They have to buy the whole block.
For example, in Harlow recently I had a case in which 22 tenants found themselves presented with an offer one Thursday to which they had to reply by the following Wednesday with bids of the order of £1·2 million.
It was suggested that these people should form themselves into a consortium. But not all the tenants are interested in forming a property company. It already seems likely that these properties, particularly small businesses, will be sold

over their heads to outside organisations with no interest in the town. Businessmen frequently do not possess the capital that they wish to invest in the purchase of their freehold. They already have insufficient capital, particularly at present levels of interest, for various purposes. In these circumstances, many tenants in new towns, including Stevenage, recognise that they will not be able to buy their properties. They have expressed a preference for becoming tenants of the council, rather than tenants of an outside organisation, if the corporation is to be wound up.
The Stevenage council, I understand, would be prepared to advocate sales to employers in the town where the sale would give employers a greater stake. The council would not necessarily look with the same approval on sales to investment trusts and pension funds whose terms of reference would be to maximise the return on capital without considering the effects on employment or the variety of services required by the community. If an investment trust or a pension fund acquires a block of property, that organisation has to maximise its return. If it can install tenants who will pay more, regardless of the needs of the town, it may exercise preference and cause considerable damage to the interests of the town.
In some cases, employers in Stevenage would have greater opportunities to buy their freeholds if the Bill went through. The present scheme offers properties to outside trusts over the heads of employers. This is true not only in Stevenage out in many towns. Any fear that the enactment of the Bill would turn Stevenage into a town of high rents and high rates is totally unfounded. I shall not bore the House with a long list of figures. A careful statement has, however, been drawn up showing various possibilities. In no case would Stevenage be turned into a town of high rents and high rates. In fact, the town and the community would benefit as the community in Letchworth has benefited.
I should like to point out that the surplus currently going to Letchworth is about £3 million a year. After 70 years, that is appproximately the same figure as that paid for the original assets. In the case of Stevenage, where the assets are £55 million, one set of figures suggests that the aggregate return within 20 years


might be of the same order of £55 million.
There is little doubt that, over the course of 20 years, this Bill would be greatly in the interests of the people of Stevenage. It would not damage the national community or taxpayers outside Stevenage. Why on earth should the present Government prevent Stevenage borough council from being enterprising enough to acquire assets which will enable it to generate greater revenue and contribute towards services that cannot be run at a profit? The Government claim to encourage enterprise. Here is a town prepared to be enterprising. But the Government, for purely doctrinaire reasons, are preventing that from taking place in a manner that the Conservative Party would not have agreed to at the time that the Letchworth Garden City Corporation Bill went through the House.
The argument that the town would not pay its way and would be taking over assets that could be sold for the benefit of the national community or other new towns is not valid. The proposed authority would be acquiring the assets at a fair price—that is, at market value. What is wrong with that? Surely, it is logical for a new town to be given the opportunity to acquire its own assets and to use them for the good of its community. That is all I am asking in moving the Bill. That is all that the promoters are asking. To deny them that opportunity is a total negation of democracy. It is deplorable that the House should be used for that purpose.
The Stevenage borough council is a highly progressive authority. It has pioneered many new ideas for its townspeople despite the problems created by the rapid growth that new town development has meant. Its assets have already provided handsome profits to the Exchequer and to the taxpayer over the years. Now that the town must embark on the inevitable process of normalisation, the sale of those assets to outside bodies can do nothing but damage to the community there. If Stevenage is left with the unprofitable and unsaleable residue of assets—for example, it will not necessarily be profitable to run car parks—while the profitable assets are sold off, those unprofitable assets will be a bur-

den on the rates of the people of Stevenage in the long term.
I hope very much that the hon. Member for Hertford and Stevenage, if he gets chance to speak, as the hon. Member representing that community, will endeavour to explain to the House how he can justify, if he decides to oppose the Bill, the idea that those unprofitable assets should become a burden on the rates.

Mr. Peter Hordern: I am puzzled by the financing arrangements included in the Bill. I understand that the assets are to be transferred at market price and that loans will be arranged to meet the price of these assets. Since the assets themselves bear a low rate of return, if they are profitable, probably not more than 4 per cent. or 5 per cent., how is the interest on the loan to be paid?

Mr. Newens: I think I have already covered that point. I shall go over it again if it was not clear. If the town acquired assets worth £55 million, it would have to pay the interest on those assets of £55 million for the first year. There would undoubtedly be a deficit, taking into account the revenue received. It would sell part of the assets. The Bill also provides for rolling over the debt—in other words, further loans—that would enable the town to meet the deficit. I have figures that have been carefully worked out. By year 10, the revenue received would exceed the outgoings and the capital sum—the outstanding loan—would then begin to decline. That is precisely what happened in Letchworth. I ask the hon. Gentleman to look at Letchworth, because there is no question but that such a measure is in the interests of the people of Stevenage as well as those of the national community.

Mr. Garel-Jones: I am quite sure that no Conservative Member doubts the hon. Gentleman's sincerity in putting forward the Bill. However, when outlining how the board would operate, he touched on a point which reflected the fears which many of us hold. I am sure that similar fears are held by many people who live in the affected area. The hon. Gentleman said that when selling assets to outsiders the management board would


try to take into account the social responsibilities and investment intentions of the potential buyer. With the greatest respect I suggest that most people who are not practising politicians might be tempted to think that in the event of the four council representatives being Conservatives, they might be politically biased against the pension fund of, say, a trade union, which for property reasons planned to make investment in that area. That is the sort of fear which many of us have.

Mr. Newens: With respect, I do not believe that that would work in practice. I do not believe for a moment that a Conservative authority would be biased in that way, or that a Labour authority would be biased in the other direction. However, I hope that Conservative Members will take into account the employment that will be generated. For example, if someone wanted to take over a large plot of land which had previously been used for manufacturing purposes, and to convert it to warehouse purposes, thus reducing considerably the number of employees, I imagine that the consideration to which the hon. Gentleman referred would be taken into acccount, just as development corporations have taken it into account in the past.
Originally, the Bill was brought forward following the Secretary of State's asset-stripping mania, because that is what it amounts to. The object is to retain in public ownership, under the control of the local community, assets which are already publicly owned.
The fact that the Government have whipped their supporters and browbeaten Conservative Members who originally wrote to the Stevenage council indicating support for the Bill and who have shown their willingness to trample underfoot the demands of the vast majority of people in Stevenage to run their own affairs will not be forgotten nor will it daunt those who are promoting the Bill, whatever the outcome this evening. We know very well that a number of Conservative Members took a quite different view about the Bill originally. I can see the hon. Member for Hertford and Stevenage shaking his head. But, of course, that was due to his assiduity in pursuading those hon. Members to change their minds.

Mr. Bowen Wells: Will the hon. Gentleman give the names of those hon. Members who have changed their minds? Many of them, who I hope will have the opportunity of catching the eye of the Chair, have been partially and selectively quoted from letters that were sent to the borough council, which has given a totally misleading impression to the electorate in Stevenage. I believe that that was done absolutely deliberately by the borough council.

Mr. Newens: I do not think that I should digress from my general theme in order to give a list of hon. Members. However, the hon. Gentleman knows very well that a number of hon. Members originally wrote to Stevenage council indicating a different point of view. The hon. Gentleman shakes his head. I shall arrange for Stevenage council to give him chapter and verse so that he can refresh his memory.
I ought to point out that the assets which could be sold off include land which would be used for housing and so on. It is not just a question of factories. Perhaps I did not make that quite clear.
Those of us who believe in democracy and the new town ideal will still carry on the struggle for Stevenage, and for all other communities, to control their own affairs. The original objective of the Act covering the new towns was to provide for that. The feeling which exists in Harlow, Crawley and every other new town, including East Kilbride, is considerable. Tonight, the eyes of everyone in the new towns will be on Stevenage and on the Bill.
I hope that Conservative Members in particular will recognise the tremendous strength of the case for the Bill. They will give it a Second Reading. Of course, some hon. Members accept parts of the Bill's objectives, even though they may not be able to accept the Bill as it now stands. In that case, Second Reading approval will enable it to go into Committee, where it can be discussed with the promoters with a view to amendment. The promoters have already intimated to me that they would be prepared to write out the powers to carry on a business and to reconsider the Bill's composition. That provision was in the original Letchworth Bill. If Conservative Members are in favour of the general principle behind


the Bill, I hope that they will at least give it a Second Reading.
I hope that Conservative Members will not follow their whip, and that they will at least have the courage to stand up and vote for the merits of the Bill. Whatever pressure the Whips have brought to bear, and whatever prejudices have been created, I hope that all hon. Members will reconsider their attitude if they have attended the debate—I would be happy to know that they have not—in order to vote against the Bill. I hope that they will allow the Bill to be further discussed by giving it a Second Reading.

Mr. Bowen Wells: The introduction of the Bill as it was presented in Stevenage by the borough council has caused me a great deal of difficulty and personal distress. One of the most difficult positions in which an hon. Member can find himself is to be opposed virulently to the borough council, which at a cost of £20,000 has used the entire resources of its public relations department to promote the Bill and to put forward views in favour of it.
I have been confined solely to the columns of the newspapers whenever I could get them to publish my views accurately. Therefore, we have been seriously misrepresented in Stevenage, and it is little wonder that a petition has been collected in Stevenage. Although 10,000 people have signed it, I have not seen it. The people of Stevenage have been encouraged to believe that the Bill will bring a bonanza, as a result of which they will probably not have to pay any rates at all, and will end up with the most magnificent facilities that will be available in any town in the country. Of course, they will petition on that basis.
I understand that I shall not have an opportunity to speak again and, therefore, I should like to refer to some of the points raised by the hon. Member for Harlow (Mr. Newens). The public relations department of Stevenage borough council was used to collect the signatures for the petition. Many of the signatories were children. Anybody who could be found on the streets was asked to sign it.
The purposes of the Bill have not been adequately presented to the town nor has there been a proper debate of the issues

in Stevenage. In view of the promises made by the council I am not surprised that 10,000 people signed this petition which I have not seen.

Mr. Newens: The petition is here in the House. The hon. Member for Hertford and Stevenage (Mr. Wells) can see it if he wishes. It is not true that children were recruited to sign the petition. It would be difficult to collect the signatures of 10,000 children in Stevenage. Does the hon. Member agree that three out of the four Conservative Members of the council voted in favour of the Bill? The Bill was discussed in the council on more than one occasion and resolutions have been passed by 20 organisations in the town which back the Bill. Does not that constitute a debate?

Mr. Wells: I am glad that the hon. Member for Harlow raised the points about the children and the Conservative councillors' support for the Bill. I can tell him that children of members' of the Conservative Association in Stevenage were asked to sign the petition at school. There are the names of children on the petition and there is no weight in the hon. Member's denial.

Mr. Garel-Jones: Do I understand the hon. Member for Harlow (Mr. Newens) to have said that the number of Conservative councillors on Stevenage borough council is three or four and that that council is, therefore, controlled by an overwhelming socialist majority?

Mr. Wells: I can tell my hon. Friend the Member for Watford (Mr. Garel-Jones) that the hon. Member for Harlow is right. There are only four Conservative members of the borough council in a membership of nearly 40.

Mr. Martin Flannery: rose—

Mr. Wells: I would like to get on and answer the points that have been made. I went this morning to the homes of two well known and well respected Conservative councillors in Stevenage to make certain that I understood exactly what their position was so that I could report to the House. Those councillors said that they wished Stevenage to become a normal town as quickly as possible and that by supporting the Bill they believed that they would make that possible in the shortest time. They did not


believe that if they relied upon the Department of the Environment to provide Stevenage with the infrastructure to make it a normal town the process would be sufficiently speedy. That is a valid point of view but I believe that the Minister will tell us that the Department will be able to move more quickly than the councillors anticipated.
What should concern us is what is best for the people of Stevenage and its environment and for other people living in new towns. We should safeguard the welfare of those people, no matter what dogma we profess or what doctrinaire views we hold about new towns. We should ensure that Stevenage prospers. My fear is that if Stevenage continues to be controlled by a public body—as during its development—it will not grow organically with the right mix of social and political factors that would inevitably emerge if it were controlled by an elected body.
We may see the commercial prosperity of Stevenage sacrificed to short-term political objectives. We may find that unemployment will increase because employers find Stevenage too expensive. Rates and rents are already high there. One projection shows that in the first eight years of the proposed Stevenage development authority there would be a rise of 400 per cent. in rents. Many employers already find Stevenage an expensive town and are moving to less expensive areas. We have already lost well over 1,000 jobs in the last year in such well known firms as Kodak and ICI. They are moving out of Stevenage because they find it too expensive. Those are the problems that Stevenage may face if it continues to be administered by a public body.

Mr. S. C. Silkin: The hon. Member for Hertford and Stevenage (Mr. Wells) said that he had spoken to Conservative councillors in Stevenage who supported the Bill. I assume that the factors that the hon. Gentleman has just mentioned would be present in the minds of those Conservative councillors. Will the hon. Gentleman tell the House whether he put those points to the councillors and what was their reply?

Mr. Wells: I am delighted further to explain the position to the right hon. and learned Member for Dulwich (Mr.

Silkin). The councillors I spoke to said that they have been assured that a large part of the assets to be acquired by the Stevenage development authority under the terms of the Bill would be sold off in the early years. That was said this evening by the hon. Member for Harlow. If that is the case, I question the purpose of the Bill.
I and many of my hon. Friends do not question the utility of the new towns concept. We believe in the new towns and we believe that they should continue and progress to maturity. The question to which we must address our minds is what is to be done with the new towns once they are substantially completed. I do not think that that issue has been properly considered. The Bill we are debating provides one solution but I believe that it is the wrong solution in principle and in detail.
The Government have announced that they support the new towns. They have modelled the new urban development corporations—established to develop inner city areas—on the new towns concept. We hope that the UDCs will bring the same benefits to our inner city areas as those enjoyed by people in new towns in employment and housing. There is no question—and I hope that the Opposition do not question it—but that the Conservatives support the new towns. Even after the disposal that will take place during the next two years the Government will make a net investment in new towns in spite of difficulties with the public sector borrowing requirement. That is an earnest of the Conservative commitment to the new town principle.
The objective of disposing of assets is to return Stevenage to a normal town where industrial and commercial assets are owned by a variety of people—pension funds, insurance companies and local people. It will also help to reduce the public sector borrowing requirement and enable continued investment in new towns.
We are on the same tack in our Housing Bill. We want to dispose of assets to the people who are most involved with them—those who live in the houses and who work, own and run the factories. Conservatives believe that real democratic ownership of assets is not achieved by large corporations but by each individual


or company owning the assets.
New towns originate from the ideas of the renowned Ebenezer Howard. In 1903 he published "Garden Cities of Tomorrow". That was a far-sighted document. Another eminent town planner, Sir Frederick Osborn, said of that document:
All its essential elements stand: moderate-sized industrial and trading towns in close contact with a surrounding agricultural countryside, each a healthy, well-equipped and coherent community; zoning of areas within each town for ready access between homes, work-places, shops and cultural centres; limitation of density to safeguard light, gardens and recreation space, but not exaggerated to the pitch of urban diffusion"—
a mistake which has been made in some of our new towns—
civic design aimed at harmony rather than standardization; planned internal and external communications; and unified site-ownership coupled with leaseholds, reconciling public interests with freedom of choice and enterprise.
Sir Ebenezer Howard was a strong supporter of the Tory Party. I believe that we can prove to Opposition Members that we shall breach neither the principles which energise the concept of the new towns nor Sir Ebenezer Howard's principles in what we propose.
Let us examine what has happened since 1903. Letchworth garden city did not prosper too well in its initial years. It paid its first dividend in 1945, and that was 5 per cent. That was when Sir Frederick Osborn was writing. A committee was set up during the war under the chairmanship of Lord Reith which considered new towns. Lord Reith said that in the disposal of assets there were three options—transfer to local authority, transfer to a central body or transfer to a permanent local and special body.
Some Opposition Members might contend that the New Towns Act 1946 made it clear that the assets of such towns should be taken over by the local authority. That is what was said by the father of the right hon. and learned Member for Dulwich when the Act was introduced mut the Act is not clear. I am sure that Opposition Members will agree. The Bill refers to statutory undertakers of appropriate parts and appropriate development corporations.
The options were rejected by the 1959 New Towns Commission which concluded that it would be inappropriate to transfer whole towns to the ownership and control of the local authorities. That is why the New Towns Commission was set up. In 1976, under the amendment Act, it was decided to transfer housing assets to local councils, but not industrial and commercial assets which were to be transferred to the New Towns Commission. A Labour Government introduced that measure. It shows that the Labour Party is not convinced that industrial and commercial assets should be under local authority control.
In Stevenage we have not been able to dispose of assets by giving the first opportunity to the leaseholders. I shall continue to press the Department of the Environment to make assets available first to people who live and work in the town rather than to the local council or any other body. The assets should go to the people who live in Stevenage or who work and use the assets.
How does a programme to dispose of assets to tenants and local people offend Sir Ebenezer Howard's principles? The hon. Member for Harlow referred to the Letchworth precedent. Sir Ebenezer foresaw the breakup of the town when development was substantially complete.
To illustrate my argument I shall use some of the evidence given to the Committee which considered the 1962 Letchworth Garden City Corporation Bill. In evidence Mr. Lawrence, QC, told the Committee:
This is a Bill which is designed solely to meet the particular circumstances of a particular case. It is unprecedented, except in so far as its actual clauses wherever possible follow well-established precedent, but in its objects it is unprecedented, and the reason for that is that circumstances which it is designed to meet have never occurred before. Therefore, in my respectful submission to this Committee, this Bill will set no precedent itself unless the circumstances are ever exactly repeated in the future which, as far as we can see, is so unlikely as to border on the impossible. Furthermore, it is not, if I may say so, promoted in furtherance of any political doctrine.
That sets the scene. Special circumstances surrounded the Letchworth Garden City Corporation Bill. It was the first garden city to be created. It was founded not with public money—a sharp contrast to Stevenage—but with private money.


Letchworth fell into the hands of a property dealer who undermined the principles on which the town was formed.
A leaseholding system was adopted and accepted by the private development company. The leasehold system was designed by Ebenezer Howard to make certain that leases controlled the ground rent of all development land in the whole town of Letchworth. He did not, and the company did not, take account, when renewing the leases, of any building, be it a house or a factory, on those sites. This was enshrined in the memorandum and articles of association.
The major differences between the Letchworth Garden City Bill and the Stevenage Development Authority Bill can be seen by reference to the preamble. I quote again from the evidence that was given to the Committee:
The objects for which the company was established, as set out in the memorandum of association of the company dated the twenty-seventh day of August 1903, included the following: (3)(a). To promote and further the distribution of the industrial population upon the land upon the lines suggested in Mr. Ebenezer Howard's book entitled Garden Cities of Tomorrow … and to form a Garden City (that is to say) a Town or Settlement for agricultural, industrial, commercial and residential purposes or any of them in accordance with Mr. Howard's scheme or any modification thereof.'
That was the objective, and it was an ideal that the 1962 Act sought to preserve.
Let us not think that Sir Ebenezer Howard was not a practical business man. He was offering shareholders in the company a 5 per cent. dividend. Although a 5 per cent. dividend would be pitiful in current circumstances, in those days, when consols were perhaps at 2½ to 3 per cent., it was a very sensible and a genuine investment.
The preamble mentioned the winding-up of the company, and the original memorandum stated:
Upon any winding up … to apply for the benefit of the town or its inhabitants any balance remaining after (1) Repayment of the paid-up capital of the Company; (2) Any sums required to make up a cumulative dividend of 5 per centum per annum thereof; A bonus not exceeding 10 per centum upon the amount paid on the Ordinary Shares.
Any balance left over, as will be noted, was to go to the town. This is what was being referred to by Ebenezer Howard,

and the debate should not obscure the point. He was talking about the incremental value from turning country land into town. After paying off all these shareholders on a proper basis, that incremental value was to go towards the windup of the company. After that, the town making use of that money was to exist, we may assume, in the ordinary manner of any other town in this country, because the purpose had been served.
This is the case in Stevenage. The purpose has been served; the development has taken place. It was done quickly and expeditiously; it was properly planned, properly controlled and properly balanced. The object has been achieved. That having been done, we now have to consider how best to dispose of those assets to the people who most need them.
If I hurry on with my speech, Mr. Deputy Speaker, I do so because I know that there are many hon. Members who wish to speak in this very important debate. Bearing in mind the Letchworth precedent, I want to demonstrate how very different from it is the Stevenage Development Authority Bill. In the preamble, there is nothing mentioned about the type of thing that Letchworth was facing at the time in question. In the preamble we find the words:
And whereas, although the purposes for which the development corporation was established have been substantially achieved, it is expedient that the property of the development corporation should not be fragmented by being disposed of by private treaty or by being transferred to the Commission for the New Towns in accordance with the provisions of the New Towns Act 1965 but should be transferred to a new body corporate with responsibility for securing the future health and development of the Stevenage New Town in the best interests of the community: And whereas it would be of public and local advantage to constitute a Stevenage Development Authority as in this Act provided and to transfer to that Authority the undertaking of the development corporation".
Here we see the kernel of the difference between Conservative Members and Labour Members, because, underlying the purposes set out in that preamble are, of course, the assumptions that private enterprise, private tenants, do not have the community's interests at heart, that they are not able to develop the town and benefit the community by their activities, and that only a publicly-owned and controlled body can do that.
I want to turn briefly to the fact that the Bill is retrospective and even confiscatory. On page 3, in the interpretation clause, we find that:
all interests in any property forming part of the development corporation's undertaking on 19 October 1979 (other than any interests in any lands or buildings not shown on the deposited plans or included in the deposited book of reference) created or disposed of by the development corporation or the commission, as the case may be, after that date otherwise than in the normal course of business".
That refers to the fact that the authority purports in the Bill to nullify any sale that has taken place after 19 October 1979 and transfer it, at the price at which it was bought, to the Stevenage development authority. That is retrospective legislation of which this House usually throws out any consideration. Secondly, it means—[Interruption.] The point about retrospective legislation is that this House should rightly abhor it.

Mr. Newens: rose—

Mr. Wells: The clause could well be confiscatory, and that is also a matter that this House should abhor.
The major matter that we should be considering is contained in clause 5. Here we have the authority being controlled by the borough council. Four out of the seven members are to be appointed by the borough council. That is the major cause of our fears. I welcome what the hon. Member for Harlow said. He pointed out that the borough council would be prepared to modify that clause. If it is not modified, the Bill amounts to a major municipalisation, to a communisation—a sovietisation, one might say—of Stevenage, because it will be controlled by the political party in power in the Stevenage borough council, and not always will the power on the authority change with the complexion of the makeup of the borough council. The council has made a major mistake if it wishes to gain any kind of support from Conservative Members in this House, because this aspect of the Bill has led to a great deal of disquiet.

Mr. Guy Barnett: The hon. Gentleman has used words such as "sovietisation" and "communisation", the meaning of which I do not quite understand. Would he apply words of that kind to the position which now

exists in Swindon, where there is complete agreement between the two main political parties about the massive investment that the local authority possesses in industrial and commercial property?

Mr. Wells: I am not familiar with the Swindon case. Therefore I cannot answer that question.
I want next to consider clause 10, dealing with the object of the authority. It states that:
The objects of the Authority are to manage, turn to account, carry on, develop and extend the undertaking of the Authority as a public service and for that purpose the Authority shall have power to acquire, hold, manage and dispose of land and other property, to carry out building and other operations, to carry on any business or undertaking necessary or expedient for the purposes thereof or any purposes incidental thereto.
There we see the attempt to take powers to trade and to enter into any business, and to contract. This is the type of thing to which no one on the Government side could possibly contemplate agreeing. At a meeting earlier today I had the assurance of the leader of the majority party on the borough council that it was not its intention that that part of the Letchworth Act should have been repeated in the Stevenage Development Authority Bill, and that it would have liked to remove it. I hope that we can believe that assurance. I was very glad to hear it, because it would certainly make the Bill more acceptable to Conservative Members.

Mr. Newens: Will the hon. Gentleman say whether that alteration would make the Bill sufficiently acceptable for him to vote for the Bill or to abstain? Since he began to speak, I have already spoken to Members of the Stevenage borough council. If they were prepared to withdraw the parts of the Bill to which he objects, would he support its Second Reading? After all, the hon. Gentleman will have the opportunity to vote it down if the Stevenage borough council does not make good its promises.

Mr. Wells: I am grateful to the hon. Gentleman for that suggestion. I was discussing the principles in addition to the most objectionable part of the Bill.

Mr. Newens: The answer is "No".

Mr. Wells: I had to make the point that that clause was in the Bill. Labour Members will understand that we have


to oppose the Bill vigorously and robustly in the light of the inclusion of that clause.
The identical clause was in the Letchworth Bill in 1962, but the subsequent part has been left out. After the provision relating to being able to trade in any way, it went on:
Provided that in carrying out the said objects the Corporation shall have regard to the maintenance of the undertaking of the Corporation as an entity in accordance with the principles upon which the Letchworth Garden City was founded and has been managed until the end of the year 1960 and, in particular, in the extension or renewal of ground leases, shall have regard only to the increased value of the land clear of the buildings (if any) situated on the land and of any improvements to the surface made by the lessee.
That was the clause to which I was referring when I said that the Letchworth Bill was entirely different and was based on entirely different concepts. We are interested in the maintenance of the principle of Ebenezer Howard which was the unity of freehold until such time as the town was fully developed. Stevenage is not proposing to retain that principle. It is proposing to sell off the freehold as and when it suits the financial circumstances in which it finds itself.
I turn now to the financial aspect. The hon. Member for Harlow referred to the borough treasurer's promotion of a number of financial projections. As hon. Members will know, the Shadow Chancellor of the Exchequer, in his term as Chancellor, demonstrated how unreliable financial projections are, particularly when they are put forward by Labour Governments.
Looking at the financial projections, if we say that the authority should not borrow over 60 years, because many of the assets are already ageing, what is the result? I wonder whether it could borrow money for the purchase of these assets on a 60-year repayment term. The repayment might have to be made earlier.
The crucial question is the assumed interest rate. The treasurer has assumed an average interest rate of 13 per cent. We all know that it is not possible to raise money at that rate now. It will be nearer 17 per cent. or 18 per cent. If we assume that the average interest rate will increase to 15 per cent., the projections show a very different picture in the tenth year from that suggested by the hon. Member for Harlow. On that basis the projections show a rising

deficit which can be financed only through an increase in rates by the borough council. If the assumptions of inflation and interest rates are wrong, Stevenage borough council could find itself in a very serious position.
I have a letter from the chairman of the Letchworth garden city corporation in which he says that he does not know where the Stevenage development authority expects to borrow money on the terms outlined; that is, the amount, the length of term or the rate. Therefore, our fears about the financial projections are well founded.
I now rush on to the application of the revenue in clause 25(6). We see there that if there is any surplus the Stevenage development authority may devote it
to the provision of traffic and transport facilities, lighting, drainage, markets, libraries, baths or otherwise for the embellishment of the undertaking of the Authority, the provision of means of education, welfare, recreation or amusement for the people or for any other purpose which the Authority may deem to be a requisite public service.
I accept that the financial provisions do not escape central Government sanction other than when assets are being purchased. If a surplus profit is made, the authority will be able to devote that profit to any purpose whatsoever without reference to any authority. Thereby, the borough council, working through the development authority, would be able to evade control by central Government. The power in clause 22(1)(a)—
such sums as may be necessary for any of the purposes
—might enable it to borrow without effective sanction from the Government.

Mr. Hal Miller: Some of the powers mentioned by my hon. Friend appear to belong to county councils and other authorities. Can he give us the views of the Hertfordshire county council or other authoities—for example, the water authority—about the proposed development authority having powers which might be thought to be more properly in their sphere?

Mr. Wells: I do not know the views of the Hertfordshire county council. As far as I know, it has not been invited to give its views. Such powers are normally within the province of the Hertfordshire


county council. But I imagine that, under this provision, the Stevenage development authority would be able to establish separate schools from the Hertfordshire county council. It certainly would not be appropriate to enact a Bill with such a clause in it, because it would cause a great deal of confusion.
If the authority makes a loss, its only ability to make good that loss is to precept the borough council. The borough council cannot object to that precept. Therefore, without capital sanctions or borrowing powers granted by central Government, it would have to raise the deficit from the ratepayers. Hence, my problem, looking to the future, about what might be involved for the people of Stevenage in terms of a high cost town with major unemployment, particularly for young people. That is a matter that should concern all hon. Members.
Apart from the deficiencies in the Bill, we must look at the principle. The Bill proposes continued ownership and control by a public body of the entire town, except for 30 per cent. of the housing assets now in private ownership. Presumably it is thought that only a public body can properly manage land and make decisions. However, I believe that the ordinary people of Stevenage who wish to purchase their homes, but are being prevented from doing so by the policy of the borough council, should also own and control the industrial and commercial assets of the town in which they live and work.
Stevenage borough council and many other new towns will be in difficulty after the demise or winding up of their local development corporations. We are concerned about that, and wish to press the point on the Secretary of State for the Environment. The borough council should own the same type of assets as a mature town of similar size elsewhere in the country. I hope that my hon. Friends will join me in pressing the Minister to make certain that the borough council starts life on that basis.
The borough council has to provide in a short period social and recreational facilities that have been developed over the years by mature towns. It will thus incur a greater loan debt. The borough council will possibly have great financial

difficulties in looking after non-revenue earning assets in the town. I am concerned that that should be prevented. I shall continue to press the Department of the Environment to take cognisance of that difficulty and make certain that the Stevenage borough council is put on a basis similar to other towns in the country.
Mature towns are able to control development through planning control. They are able to provide for their inhabitants, and they have a balanced community between owner-occupied and rented accommodation. Stevenage is substantially complete as a new town. We should move quickly towards its establishment on the basis of a normal, mature town. I propose that we oppose the Bill. It offends the principles and ideas of putting Stevenage into the position of a normal town.

Mr. S. C. Silkin: We have listened to two detailed speeches of some length. I make no complaint as they were opening speeches. However, I hope to be brief.
I am not ashamed to say that my intervention is in part sentimental. As the hon. Member for Hertford and Stevenage (Mr. Wells) said, my family has had an extremely close connection with Stevenage, the first of the new towns. I remember when the then Minister for Town and Country Planning visited the nucleus of the new town to address an extremely hostile public meeting. In my earlier incarnation my decisions were sometimes not treated by the press, or even by hon. Members, with the respect that they deserved. I recollect that the then Minister suffered the same fate, although in the end his ideas came to be greatly respected. The new town that his legislations initiated became the envy of the rest of the world. I am not ashamed to admit to a degree of sentiment.
If it were purely a matter of sentiment, I should not be speaking in the debate. It goes far beyond that. The hon. Member for Hertford and Stevenage rightly said that the then Minister had always contemplated that when a certain stage in the development of the new towns had been reached the local authority would be in a position to take over from the development corporation and carry on


from where it left off. History has altered that to some extent, but that was the basic principle on which the Minister proceeded when the original concept of the new town came before this House.
In the closing part of his speech the hon. Gentleman pointed to substantial reasons why a new town must be treated somewhat differently at least in its process of development, from a town that is mature and fully developed. He pointed out that it was necessary for local authorities to have a considerable degree of influence in the kind of development that took place.
In the legislation the Government have accepted that there are circumstances in which it is right that a development corporation should be created, although they did not have this case in mind. In the Government's view there are exceptional circumstances in which the best way of ensuring that land is developed in accordance with the general area and as an entity in the best interests of the neighbourhood is through an urban development corporation. That is why in my borough and in Merseyside they have it in mind to create such a corporation. It is common ground that there are acceptable circumstances where that is justifiable.
The one point of principle that I wish to put in relation to this Bill concerns whether those exceptional circumstances include the position of a new town such as Stevenage, where a considerable amount of development is still to take place before completion.
That is more important in a rapidly created new town than in metropolitan areas with a long history. The reason is simple. The whole object of new towns, and particularly Stevenage, was rapidly to draw away from metropolitan areas a population that had to be accommodated, serviced and provided with infrastructure and employment. What took perhaps 50 or 100 years in other urban areas had to be compressed into a few years in a new town.
Indeed, in the early days of new towns one of the great complaints was that because of the restriction on resources it was not possible to provide all the necessary infrastructure, including entertainment facilities, youth clubs, and so on, to attract people into the new towns.
All the facilities have to be provided at a rapid pace, and will inevitably create a considerable burden on those who move to the new towns unless the burden can be offset by the advantages from future profits accruing from commercial and other developments in the new town. I do not say that it is impossible for private enterprise or property companies to carry out a reasonable development. My argument is that if one is to compensate adequately those in the new towns and remove the burdens that they have had, and will have, to bear because of the rapid compression of expenditure, one has to create something to balance it on the other side.
Private enterprise might produce good plans, but inevitably it will be interested in acquiring land only if it believes that a development can be profitable. It will naturally carry out the development at the greatest speed and at the maximum possible profit to itself.
The hon. Member for Hertford and Stevenage said that it was essential that those living and working in new towns should be considered in the future development of the new towns. There is an inevitable dilemma. Private enterprise is interested in maximising profits as rapidly as possible—that is perfectly reasonable, because pension funds must do that. On the other side are the interests of those living in the town and the interests of orderly development. The need to reconcile those opposite factors must be borne in mind.

Mr. Bowen Wells: Another distinction of the right hon. and learned Gentleman's family is to have introduced immediately after the war the most comprehensive town and country planning Acts known in this country. Was not the purpose of those Acts to produce just the balance between private thrusting enterprise and the interests of the community? Do we not still have those Acts, much enlarged and with much greater powers?

Mr. Silkin: That was the object, and in many circumstances, within existing towns, it is possible, by the use of those powers and the additional modified powers that have been added over the years, to have a partnership that produces the right sort of development.
If those powers had been sufficient in themselves there would have been no need


for the New Towns Act. It was because of the special difficulties of the creation of new towns that we had to have that Act and a special system of development corporations. What I am saying is that that situation exists so long as the new town is not fully developed and it exists no less when it is well developed, having regard to the circumstances to which I referred—the rapid compression of that development into a short period.
It is that factor that justifies what is proposed in the Bill, and I hope that the hon. Member for Hertford and Stevenage, who I know has the interests of his own constituents at heart, will bear that in mind when he considers the way in which he will vote tonight.

The Under-Secretary of State for the Environment (Mr. Geoffrey Finsberg): The right hon. and learned Member for Dulwich (Mr. Silkin) very rightly participated in this debate and I would like to pay my tribute to a man who was known as "Papa Silkin" in the new towns. He came from a superb stable—the old London County Council—which has provided at least three very distinguished chairmen of new towns and I pay tribute to the hard work that they are doing for the new towns.
It might help the House if I were to intervene at this stage to give the Government's views on the Bill. I will begin by disposing of two or three points raised by the hon. Member for Harlow (Mr. Newens). There is no Government Whip, let me make that perfectly clear. Secondly, my hon. Friend the Member for Hertford and Stevenage (Mr. Wells) has explained his position as regards the Bill very clearly. We need to recall that his was a famous victory in dislodging a former distinguished Cabinet Minister. He is right if he thinks it is in the interests of his constituents to oppose the Bill.
I have listened with interest to the arguments put forward by the supporters and the opponents of the Bill. Let me make it clear at the outset that nothing I have heard today has persuaded me to change my view that this Bill should be vigorously opposed.
I noted that there was some dissent about the petition. Some say that it was

signed by schoolchildren and others say that it was not. I have no doubt that there are schoolchildren's signatures on the petition, as indeed there were signatures purporting to be those of Mickey Mouse on the income tax returns of the casual workers in Fleet Street. That is a fact of life and we should not try to brush it aside. Each of us knows well that, whatever the cause, if we seat ourselves at a table in a street in our constituency we can get people to sign a petition without reading it. That is not disparaging; it is a fact of life. Irrespective of the cause, I do not think that anyone would disagree with that.

Mr. John Major: A further point strikes me as quite extraordinary about the petition. In view of the nature of the Bill, would my hon. Friend care to speculate on the curious fact that the Member of Parliament for that constituency appears not to have seen the petition or to have been approached with it? I wonder whether my hon. Friend would care to express a view as to why that should have been so.

Mr. Finsberg: I think that I had better leave the Stevenage council to account for what seems to have been a lack of normal courtesies in these matters. There may be a good reason for it, so I must leave the council to account for it.
I carefully noted some of the points made by my hon. Friend the Member for Hertford and Stevenage about some of the usual assets being acquired by the council. I shall give serious consideration to that, subject to the overriding state of the national economy, as I told a deputation I saw some months ago.

Mr. William McKelvey: As regards the point about the people of Stevenage, my information is that at a public meeting held as recently as 29 February the voting figures were 261 in favour of the Bill and 5 against, which seems to show that at least the population of Stevenage is in favour of the Bill.

Mr. Finsberg: 261 out of 50,000 or 60,000? I think that speaks for itself.
Let me deal with one of the points raised by the hon. Member for Harlow (Mr. Newens) on the disposal of assets. Again, it is necessary to put the facts on record. At no stage has the Secretary of of State attempted to require corporations


to sell assets. What he has done in a number of cases, including that of Stevenage, is to tell corporations that they will have to fund their own further investments by realising some of their completed assets and that the Government will not provide further finance from the National Loans Fund. Beyond this, he has been able only to request corporations to co-operate in a sales programme. Those are the facts. It is necessary that they be placed on record before too many distortions build up a mythology.
When the promoters of the Bill, Stevenage borough council, came to see me, I explained the reasons for the Government's outright opposition, for it is seldom that a Private Bill is so clearly running totally against Government policy. Firstly, the Bill seeks to negate the Government's policy on the disposal of new town corporation assets to the private sector, which is an important part of the Government's basic economic strategy to reduce the public sector borrowing requirement. Instead of helping to reduce the PSBR, this Bill, if it were passed, would, on the contrary, increase it. It proposes the setting up of a new public body with powers to borrow up to £55 million. It would fall to the ratepayers to service this debt, which would inevitably, therefore, increase the PSBR. As my hon. Friend said, this is probably one of the greatest examples of attempted municipalisation.
Let me amplify a couple of the figures that my hon. Friend gave. These were the assumptions of the rate of interest and the length of time over which Stevenage might be able to borrow. Stevenage council has taken a rate, as we heard in the borough treasurer's comment, of some 10 per cent. As was said by Opposition Members from a sedentary position, that is just not living in the world of reality. But let us just take that figure, and then let us look at some real figures, taking an interest rate of 15 per cent.—which, again, as one gathers from sedentary interruptions, is not unreasonable—dropping perhaps to 13 per cent. after five years.
Stevenage's forecast, on an unrealistic 60-year loan at 10 per cent., will give it a debt dropping from year eight at £61·5 million by £1 million or so a year thereafter. On the realistic basis, by year 10 the debt will have risen from

£55 million to £96 million, and will continue to rise whatever else can be done. That is what is being offered to the ratepayers of Stevenage if the Bill is accepted: an ever-rising debt which in 10 years will have reached £96 million, even assuming the actual rental income which the corporation's treasurer has put into its own estimates. I hope that that will be clear to the 63,400 residents of Stevenage who did not turn up at the meeting.
Secondly, the Government believe that the commercial and industrial assets concerned would be more effectively managed in private ownership than if put into the hands of local authorities, especially those of Stevenage borough council, which, as far as I am aware, does not have any special expertise in these fields.
Since I took office, I have been given the responsibility for new towns and I have visited every one of the new towns in England. I am glad that I have had the chance of doing that because I can speak from having been to them and from knowledge of what the problems are. It is right that, whenever possible, Ministers should be acquainted with the subject with which they are dealing.
In general, we are keen to reduce the unusually high involvement of the public sector in the new towns. Now that many of the towns are substantially completed, we want to obtain a better balance between the private and public sectors which would compare more closely with that which exists in other towns.
Thirdly, the parallel with Letchworth, on which hon. Members have drawn most heavily already today, is false and misconceived. My hon. Friend the Member for Hertford and Steventage has already demonstrated that that is a misconception.
There are fundamental differences between the Letchworth Garden City Corporation Act 1962 and the circumstances in which the Bill is being promoted. The Bill will create an authority dominated by Stevenage borough council whereas the Letchworth board has a chairman and three members appointed by the Secretary of State for the Environment, one representative from the county council and one from the district council. There may well have been bipartisan support because that was not a naked political attempt to grab control of the new authority.
Reference has been made to Letchworth and to the authorship of certain papers. The North Herts Gazette of Thursday 20 March states:
'Stevenage councillors—the men who want to buy their town—are NOT in the same position as Letchworth councillors in the early 1960s', says Horace Plinston, the man who as Letchworth's town clerk did the spadework for the introduction of the Letchworth Garden City Corporation Bill to Parliament.
And although the Letchworth experience has been widely quoted as a powerful argument for supporting the Stevenage Bill, Mr. Plinston thinks the dissimilarities in the towns' situations are greater than the parallels.
The hon. Member for Harlow said that some Conservative Members had written to Stevenage giving their support. When challenged by my hon. Friend the Member for Hertford and Stevenage he was unable to give any names. Again, I quote from the North Herts Gazette of Thursday 20 March:
Stevenage Town Twinning Association committee are the latest local group to back the Bill. And their thumbs up—which came at a meeting on Friday night—brings the number of local organisations who have notified the council of their support up to 20. Latest Member of Parliament to respond is Mr. Harry Greenway, Conservative Member for Ealing, North.
My hon. Friend the Member for Ealing, North (Mr. Greenway) is attending a constituency engagement this evening, but he will make clear by his vote his total opposition to the Bill. If those are the sort of quotations that are being used by the supporters of the Bill, I suggest that little value should be placed on them.

Mr. Clive Soley: As I understand it, the 1962 Act maintained the principle of keeping the assets for the benefit of the people of Letchworth. The aim is the same in the Bill. If that is considered a major objection, surely the Minister should allow the Bill to receive a Second Reading and deal with the objection in Committee.

Mr. Finsberg: My hon. Friend the Member for Hertford and Stevenage dealt clearly with the total difference between Letchworth and the new town of Stevenage. I do not agree with the hon. Member for Hammersmith, North (Mr. Soley).
The hon. Member for Harlow said that pension funds wished to maximise their profits. They are perfectly right to take that attitude in the interests of their pen-

sioners. He added that to achieve that they might wish to bring in outsiders to pay higher rents. He will know that under the Landlord and Tenant Act 1954 a sitting business tenant may apply to the court for a new lease and that, if there is a dispute on rent, the county court will fix it. There is no problem. The hon. Gentleman made much of the pension fund argument to suggest that industrialists should back the Bill instead of recognising the facts of life.
I shall expose another false parallel with Letchworth. As my hon. Friend the Member for Hertford and Stevenage has said, Letchworth has been financed from the outset by a private company and by private funds. The Letchworth Act was designed to prevent the misuse of those funds and assets threatened by a takeover of that company. On the other hand, Stevenage has been financed all along by heavy public investment.
Now that the town is substantially complete and that the new town corporation has done its job, the time has come for the taxpayers at large to receive some return on their investment. The corporation is nearing the end of its life. I pay tribute to the noble lady the Baroness Denington for her work as chairman of that corporation.
This Bill seeks, under clause 5, to give Stevenage borough council effective control over the assets of a new town corporation—by giving the local authority power to appoint a majority of the authority's members. That is totally different from Letchworth. Letchworth was keeping one nominee. The chairman of the Letchworth corporation, who has been quoted as pouring yet more cold water on the financial proposals of the treasurer of Stevenage was appointed by the Secretary of State for the Environment in the previous Labour Government. He was a Labour member of London county council and of the GLC. He is no Conservative stooge.
The Bill means that the assets which had been funded out of general taxation over the years, would be transferred from the Exchequer to the local authority. That is totally unacceptable. The Bill has implications that extend far beyond Stevenage. Let it not be thought that Stevenage is a special case. All the other new town corporations have embarked upon disposal programmes aimed at


raising £330 million by 31 March 1981, and thereby significantly helping to reduce the public sector borrowing requirement. Many industrialists and commercial interests, including sitting tenants and the financial institutions, are showing keen interest in purchasing these assets.
Clause 101 onwards of the Local Government Planning and Land (No. 2) Bill gives my right hon. Friend the power to direct corporations in this respect. If this Bill were to succeed, it would seriously damage the whole sales program me and undermine the confidence of businessmen everywhere—not just in Stevenage—who are contemplating purchasing new town commercial and industrial properties.
We know that other authorities with new towns in their areas are closely watching the progress of this Bill. They intend to introduce Bills of their own if this Bill succeeds. In the Government's judgment, it is therefore important to defeat the Bill, not just for the sake of the people in Stevenage, but for the benefit of those in other new towns and of the country at large.

Mr. Roy Hattersley: I congratulate my hon. Friend the Member for Harlow (Mr. Newens) on his initiative and public spirit in moving the Second Reading. I also congratulate him on the clarity of his description, as this is a complicated subject. The background to the debate is, and must be, the Government's policy and determination to sell off new town assets. That policy and determination spring from two quarters. The first is ideological, and was described by the hon. Member for Hertford and Stevenage (Mr. Wells) as "principle". The second is the Government's wish to finance a reduction in the public sector borrowing requirement by means of such sales. I have two points to make in response to the two reasons that the Government have given for opposing the Bill. I wish that the Bill had been discussed not in terms of ideology but in terms of what is best for the people of Stevenage. That is not what the hon. Gentleman did. The record will show paragraph after paragraph in which he said that he regarded the merits of the case as lying against the Bill. He said that even if that were not so he

would oppose the Bill, as a matter of principle.
We do not consider that the Bill involves only a question of principle, any more than Stevenage's Conservative councillors thought that they should line up on an ideological party basis. We believe that assets that might be used for the benefit of those living in that area should be retained. It is an issue that should not divide parties but unite them.

Mr. Michael Morris: The previous Labour Government, the consultation papers and the New Towns Bill determined that the commercial industrial assets should go to the New Towns Commission and not rest with the local authority or any other local body.

Mr. Hattersley: The same Government in the same document said specifically that they should not be used for private speculation or profit. That is the issue that we are discussing this evening, and that is the issue on which the hon. Member and I are on different sides.
The second point that prompts the Government's desire to sell off new town assets is their desire to dispose of these assets in such a way as to reduce the public sector borrowing requirement. The House will hear a great deal about the PSBR over the next few days, and I, like most informed economic opinion, believe that the Government misunderstand the nature of the problem involving the PSBR. At the moment Conservatives are obsessed by that point.
The scheme that has been put forward by the Stevenage borough council and presented to the House by my hon. Friend the Member for Harlow can preserve that objective entirely. The object of the scheme is to allow the Government to obtain the financing that they want and that will secure their economic objective and yet retain the Stevenage assets in a condition that will enable the Stevenage people to benefit from their acquisition.
The third fact that must be considered as a background to the Bill is the simple and inevitable fact that the Stevenage development corporation is about to be wound up. I believe that that will happen next year, or perhaps a little later. There is a very clear indication that until the


winding up of the corporation the Secretary of State will pursue his policy of requiring corporations to dispose of their assets as quickly as possible.

Mr. Geoffrey Finsberg: The assets will be transferred on 1 July this year.

Mr. Hattersley: I have a reputation for understating my case. If the transfer is to be faster than I suggested, I accept the Minister's correction with pleasure, because it intensifies the problem as I described it. That problem is, in any case, intensified by the passion with which the present Secretary of State insists upon the sale of new town assets, as they now exist.
I noticed that in an aside that might have been described as irrelevant—I am sure that it was not, otherwise it would have been ruled out of order—the Minister explained the Secretary of State's attitude to the sale of new town assets and the £100 million worth that he required them to sell in the summer. I noted very carefully the words that the Minister used. I take it from what he said that until the Local Government, Planning and Land (No. 2) Bill passes into law, the Secretary of State will not have the power to require new towns to sell their assets.
I say that for two reasons. Many of the chairmen of the new towns believed that the Secretary of State was instructing—not requesting—them to sell their assets. They believed that with such conviction that they took legal advice. They obtained that legal advice from some pension funds that thought that they might buy the assets that the new towns had been instructed to sell. The lawyers to the pension funds and the lawyers to the new towns believe that had it been an instruction that the Secretary of State had given, he would have been operating ultra vires.
The Minister has made an appropriate apology for the wrong impression that the Secretary of State gave on that occasion. I hope that he will now say in exact terms that the Secretary of State does not at present have power to instruct new towns to sell their assets.

Mr. Finsberg: My remarks were not made in an aside. I was courteously responding to a point made by the hon. Member for Harlow (Mr. Newens). That remark was in relation to Stevenage. On the generality of new towns, my right

hon. Friend is taking action to set his powers beyond doubt, but the legal advice given in the case of another new town was that there was no reason why the new towns should not sell and why the Secretary of State should not require them to do so. The most important point is that in the end it must be for each new town corporation, on the basis of its own legal advice, to take its own decision. There is no problem at all, generally. If the right hon. Gentleman tries to build a case on that he is wasting his time.

Mr. Hattersley: I am not trying to build a case; I am trying to obtain an answer. I believe that even the most charitable hon. Member would share my view that the Minister's answer was not the least ambiguous that we have ever had from a Government Minister. I ask him the question again. If he wants the House to move on from this point, he can answer "Yes" or "No", and we shall leave the matter. Does the Secretary of State at this moment have the power to require new towns to sell their assets? [HON. MEMBERS: "Answer."] As Lewis Carroll said in another fantasy, "Answer came there none".

Mr. Finsberg: The answer will come if the right hon. Gentleman cares to table the question.

Mr. Hattersley: The Under-Secretary is living up to his reputation. I am a compassionate man, as well as possessing other virtues. I think that we should leave the matter for another occasion, to spare the hon. Gentleman's embarrassment and to pursue the real culprit, the Secretary of State, who pretended to local authorities that he possessed powers that it is now clear he did not possess.
I move on to the problem of the disposal of particular assets and the question, more fundamental than the behavior of the Secretary of State, why the assets that are likely to be disposed of should remain in the hands of the public of the area in which they have been developed. I do not understand the argument that since these assets were acquired by the public out of public funds they should now pass into private hands and be allowed to make a profit for private developers. That is a fundamental question that we, on the Opposition side, ask. The hon. Member for Hertford and Stevenage has not begun


to answer the basic question why—if the figures are right—the people of the area should not benefit from the retention of these assets. I fear that the hon. Member for Hertford and Stevenage took refuge in three sorts of fantasy. The first was the ominous fantasy that if the Bill goes ahead, rates may increase by 400 per cent.

Mr. Bowen Wells: The right hon. Gentleman obviously does not listen with any great accuracy. I said that the rents projected by the borough treasurer for the industrial and commercial assets are projected to increase by 400 per cent. in eight years. I said "rents", not "rates".

Mr. Hattersley: The hon. Gentleman also said some ominous things about the burden that was likely to fall on the rate front. If I am mistaken, I withdraw without any qualification. The hon. Gentleman did, however, say those ominous things about rates. He also said another thing that I believe to be equally fantastic. That was the hopeful fantasy that when these assets move out of the public sector into the private sector they will be acquired, somehow, in small lots, by the people of the area, not least the people who already work there.
If, in referring to the people who already work there, the hon. Gentleman means the large companies that presently rent, he may be right. If he means the men who clock on in the morning and leave at 5.30 pm. I would say that there is little hope that hey will obtain a stake. I hope that the hon. Gentleman knows what is happening over the sale of other new town assets, not least the speed at which the Secretary of State requires them to be sold. In many areas, those assets are being sold off in large lots much more quickly than the new town corporation wants to sell them. They are being sold in large lots to property developers. The only hope of people—including companies—in the area acquiring these assets is to go to the property speculators, buy from them secondhand and pay an enhanced price, which ought to go to the corporation.

Mr. Wells: rose—

Mr. Hattersley: The hon. Member detained the House for 50 minutes. That is his right. I do not wish to speak for that length of time. Other hon. Members wish

to speak. I shall give way to the hon. Member on this occasion, but not again.

Mr. Wells: The right hon. Gentleman speaks of the disposal of assets in large lumps. The problem in Stevenage is that we have been trying to dispose of large lumps of terrace shops or terrace factories. These are difficult to sell individually. The leaseholders of those shops were not able, or found it difficult, to bid for the whole block. I made clear during my speech, as I have made clear to the Minister, that I believe that those lots should be broken up to give the leaseholders the first opportunity to purchase them. One block of factories has been purchased by the individual owners of those factories. I went to considerable trouble to assist them to do so.

Mr. Hattersley: I know that that is what the hon. Gentleman wants. Indeed, he said that that is what he would want. But that is not what he will get. More often than not, such assets will be sold in large lots, and they will be sold a second time, if at all, to the local residents with the profit going where I believe it should not go.
That describes the nature of the hon. Gentleman's third fantasy. He kept making a choice between what was happening now and what he would like to happen in some ideal world of his own creation. That is not the choice that faces him. As the Minister made very clear by giving no affirmative answers to the suggestions that the hon. Gentleman made, the choice that he must make is not between some scheme of his own and what happens now but, rather, between selling off the assets to a private company or maintaining them for the people of Stevenage —in other words, voting for the Bill or not. There is no third choice, and what I have described is exactly the choice that the hon. Gentleman and the electorate of Stevenage will discover as the years go on.
The hon. Gentleman tried to justify the case for sale by talking about financing, and the Minister did exactly the same. He disagreed with the financial forecasts as supplied by the council, and said that there was really no hope of obtaining the sort of terms for which the council would search were the Bill to be passed into law. I am advised—the Minister must know it—that the pooled loan rate is now


a little more than 9 per cent. The Stevenage council has discovered that it could borrow the money at 15 per cent.—a crucial figure. If it could do that, there is no doubt that after a period of a minimum precept from the rates, which is always below 1p, and after seven or eight years we would move into a period when the assets would actually make money for the people of Stevenage.
Either the assets have some value or they have not. If they have no value, we have no problem, because the private companies will not buy them. If they are worthless, or are bound to run at some sort of loss and to produce nothing but a deficit for their owners, the problem does not arise, because the private companies will not touch them with a barge pole. On the other hand, if they are assets which are capable of making a profit and running at a surplus, it is our clear conviction that that surplus should be held for the benefit of the people of the area. That is why I hope that my hon. Friends will support the Bill tonight.

Mr. Christopher Murphy: Tonight's debate is one which may have a very great bearing on the future of the new towns in this country. It is essential, therefore, to put the Bill into the context of the new town movement.
The concept of the new town can fairly be traced back to the end of nineteenth century, when the principle of the garden city was expounded by Ebenezer Howard —a principle which included the use of private capital. His imagination, and that of the other historic figures such as Sir Frederick Osborne and Louis de Soisson, has resulted in a fine example of what can be achieved—Welwyn Garden City, in my own constituency.
After the Second World War, the notion of new towns was taken up by Parliament, and a unique programme was embarked upon. Again, I can point to a good example of this form of development in my own constituency—Hatfield. Twenty-eight new towns have resulted, which now have a combined population of about 2 million. In the last 30 years of dynamic growth, 400,000 new homes have been built and more than 200 schools, 5,000 shops, 4,500 factories and 1,400 office buildings have been created.
Central Government took the initiative in building and designing the new towns, leaving it to development corporations to put that planning into operation. The provision of eight such towns around London, of which Stevenage is but one, was part of a four-part policy—a green belt to prevent the continuing spread of suburbia; towns absorbing the outward growth pressures which made the green belt necessary; the control of employment location to guide new and expanding firms to those growth centres; and provision for the renewal of inner London so that better condtions of life and work for the vast number of people who would continue to live there could be created.
How well these four aims have been satisfied is a matter for speculation. However, it is significant that the Government are taking positive action to deal with decaying inner cities and their derelict land. The vehicle for that policy is the Urban Development Corporation which is reminiscent of the means by which the new towns grew.
Their potential is another factor to be closely considered in the light of the Bill. We must consider the extent to which the new town movement has been successful and whether it would be enhanced or harmed by this proposed measure. Has it achieved the aims set in each case which were to create a whole and successful town in which scores of thousands of families would, through two or three generations, live out the greater part of their lives.
The Reith committee report in 1946 summed it up like this.
Our task, as we see it, is to conduct an essay in civilisation; to plan and design and carry into execution for the benefit of coming generations the means for a happy and gracious way of life.
The motto of my own district council, Welwyn Hatfield, puts it succinctly and effectively; "By wisdom & design". That could be the slogan for the whole new town concept.
New towns gradually become older towns. They develop character and individuality. They become entities in their own right as part of the urban framework upon which our country has been built. Why, therefore, should anyone treat them differently, as the Bill implies should be done? Why do we not


accept that, although the new towns start from a different base, they should be allowed to mature as have our other towns? Why do we not accept the fact that new town citizens have no need—nor do they desire—to be treated as special cases? Why do we not accept that the Government's aim of bringing about a transition from new town to the more usual status of a normal town is eminently sensible?
Of course we want the people of new towns to benefit, but how will municipalisation ensure that? Municipalisation is far more likely to create the reverse with all the disadvantages associated with nationalisation. The majority of citizens wish to become home owners. That is a form of private enterprise that should be encouraged. Why should not that principle be extended to industrial and commercial development? After all, if it were not for investment by private enterprise in the first place the new towns would have failed. Why penalise them now?
At the same time we should also wish people generally to benefit because to a large extent it is their money—through taxation—which has been spent in creating new towns. Selling the assets of new towns means recovering much of that national cost and thereby assisting the Government in their efforts to reduce the effects of the bloated overspending they inherited from the previous Administration. That in turn will help to reduce inflation.
The fact that the assets of a new town are taken over by private enterprise is no reason for supposing that the community no longer gains. Rates will still be levied and paid thus providing the necessary finance for the town. Jobs will still be provided—and it is hoped, will increase in number—thus ensuring the necessary employment which will provide finance for the citizens. The gains, therefore, will continue in the absence of those dangers inherent if further public bodies are set up to assist in controlling the destinies of the new towns.
Stevenage, like other new towns, should be allowed to come of age. The time for the ending of the development corporation's role has arrived. Similarly in the case of Welwyn Garden City and

Hatfield—where the assets have been held by the New Towns Commission—the moment has come for this to be wound up.
People in new towns need to be given the twin advantages that private enterprise can provide. The first is the opportunity to buy their own homes and the second is the opportunity, where a person owns a shop, office or factory, to buy that as well. It is most important that local people have the first option, because they are the people who put their faith in the new towns. For that reason, they should be the first to benefit.
As a confirmed believer in the freedom of the individual, I deplore this Bill for its attempt totally to negate such fundamental rights in Stevenage. The Bill would establish a dangerous precedent for other new towns and perhaps for older towns. It must, therefore, be resisted. In essence the Bill is undemocratic and financially absurd. It is bureaucratic and indefensible. I pay tribute to my hon. Friend the Member for Hertford and Stevenage for his courageous stand in opposing the measure which, rightly, he regards as being against the best interests of his constituents. For the sake of all who live in new towns, this authoritarian Bill must be defeated tonight.

Mr. Ernie Ross: The common ownership of land in a new town has been one of the cornerstones of the new towns movement since Ebenezer Howard published "Tomorrow—the peaceful path to real reform" in 1898. One of his early illustrations offered the phrase
go up and possess the land
as a slogan. Common ownership of a new town's estate was often referred to by him as the "master key".
His argument was that land values were created by the migration of large numbers of people to a particular location, in this case, a new town. While the increment in value was unearned by the landlord it could be said to be earned by the incoming population. He argued that it was obvious that such increments of value may, with foresight and prearrangement, become the property of the migrating people.
In a new town, where the land is held for the whole community, the entire increment of value gradually becomes the property of the municipality with the effect that it is applied in the relief of rates. The case was constructed that land values would be used for the benefit of the town as a whole and might finance not only basic infrastructure but the social and cultural services that would normally be uneconomic. Howard's first new towns, Letchworth and Welwyn garden cities, were founded on that principle.
In 1946 the Labour Government decided that the State should build new towns. The public ownership of land was identified as a major principle. The community was to be represented by the Treasury until the town was complete. In 1946 the then Minister, the father of my right hon. and learned Friend the Member for Dulwich (Mr. Silkin), explained that it was the intention, when the development of the new town was substantially complete, to wind up the corporation and by agreement with the local authorities transfer the assets and liabilities of the corporation to the local authority of the area in which the new town was situated.
In the early 1950s the local authorities began to doubt that that would happen. By 1953–54 their doubts were openly expressed. In July 1956 the Labour Opposition spokesman said that they were gravely disturbed by rumours that the corporations' assets would be sold off to private owners and developers. In 1957 the Basildon local authority published a booklet entitled "New Town Assets: the case for municipal ownership", which argued that local authority support for the New Towns Act 1946 had been" bought by false promises".
In 1958 the Commission was set up, confirming local authority fears as it transferred the assets of a new town to another arm of Government. The matter has lain there uneasily since then. Development corporations have been required to retain freeholds for the community benefit with certain minor exceptions—notably private housing. In due course the assets were taken over by the Commission.
It has always been possible to make an exceptional disposal of a freehold with the Minister's consent. However, that

freedom has been rarely sought, and even more rarely granted. The only break came under the Labour Government's transfer of housing assets legislation which made over corporation-built rented housing to local councils.
Under the present Government the general presumption against freehold disposals by development corporations in their mainstream task has not changed, except that the corporations and the Commission have had to sell freeholds to raise money at the Secretary of State's instruction—£140 million in 1979–80 and possibly £200 million in 1980–81. That forced sale of public assets is flooding the market. Powers to regularise the Secretary of State's instructions are in the current Local Government, Planning and Land (No. 2) Bill.
In Stevenage the local authority is attempting to salvage the original new town principle by promoting a Bill that will allow the new town assets to be acquired by a local corporation which will manage the assets on behalf of the townspeople. No such initiative has come from any other new town local authority.
The Bill proposes to create a publicly accountable corporation that will buy the assets of Stevenage new town as they are forced on the market by the Secretary of State for the Environment. The corporation will then manage the assets with a duty in relation to the social and environmental goals that characterised the new town, and apply the profits for the benefit of the local community.
The Bill takes as its model the Letchworth Garden City Corporation Act 1963 —a private Bill enacted by a free vote under a Tory Government. We have already heard from my hon. Friend the Member for Harlow (Mr. Newens) that if the Bill gets a Second Reading tonight —as I hope it does—the Stevenage council is prepared to accept amendments, because it realises that there are difficulties within the Bill.
The Letchworth corporation has been a great success, paying off inherited debts and now yielding a substantial annual profit that is distributed to the town's various voluntary organisations. It has also made possible the purchase of farmland around the town to safeguard the green belt and public access. It has made possible town centre redevelopment to a high amenity standard, financed a leisure


centre and the creation of a museum. These are the sorts of things that would be possible in Stevenage if the Bill were to be enacted.
Listening to the hon. Member for Hertford and Stevenage (Mr. Wells), who is opposing the Bill, it is interesting to compare his attitude with that of the hon. Member for Huddersfield, West (Mr. Dickens), who supported his constituents in dealing with their recalcitrant employer in regard to Tory legislation. The hon. Member for Hertford and Stevenage, not quite with lies but with obvious inaccuracies, clearly demonstrated that he does not intend to support his local council or his constituents. He referred to the fact that major companies were leaving Stevenage because of high rates, and he referred to Kodak and ICI. Kodak is moving back to Nottingham, where it has its headquarters, and ICI is moving to Stockton. Both companies will gain because of the employment premium grant. If the hon. Member seeks to mislead the House—

Mr. Bowen Wells: rose—

Mr. Ross: I am sorry. I shall not give way.

Mr. Wells: rose—

Mr. Ross: It might have been much better to discuss—

Mr. Wells: rose—

Mr. Deputy Speaker (Mr. Richard Crawshaw): Order The hon. Member for Dundee, West (Mr. Ross) is not giving way. I remind the hon. Member for Hertford and Stevenage (Mr. Wells) that we are short of time.

Mr. Wells: On a point of order, Mr. Deputy Speaker. The hon. Member for Dundee, West (Mr. Ross) has made personal references to me, implying that I have been lying or misleading the House. I believe that I am entitled to explain the position.

Mr. Deputy Speaker: Order. I did not hear the word "lying".

Mr. Wells: I understood that it was used.

Mr. Deputy Speaker: I thought that the word used was "misleading". That is not an uncommon expression in the

House.

Mr. Wells: rose—

Mr. Deputy Speaker: If the hon. Member will be very brief in replying—

Mr. Ross: rose—

Mr. Deputy Speaker: The hon. Member for Dundee, West is not giving way.

Mr. Ross: It might have been better if the hon. Member for Hertford and Stevenage had made this House aware that one of the Tory councillors on the Stevenage local council wanted to serve an injunction on the Secretary of State for the Environment to prevent him from selling the assets. Those are the facts of which the House should be made aware. It is those facts that deserve our support tonight.
The Stevenage local authority is a progressive authority. It is trying to preserve assets on behalf of the community that it seeks to serve, and it should be supported. I hope that the hon. Member for Hertford and Stevenage, when he considers the matter, will decide to give it his support tonight.

Mr. Nicholas Lyell: I am very grateful, Mr. Deputy Speaker for the opportunity to intervene briefly in the debate, since I am proud to represent the neighbouring new town of Hemel Hempstead.
I listened with great interest to the speech made by the hon. Member for Harlow (Mr. Newens) in opening the debate, who presented the Bill with his usual sincerity, but both he and the right hon. Member for Birmingham, Spark-brook (Mr. Hattersley), the Shadow Secretary of State for the Environment, seemed to be economically astray.
The hon. Members for Harlow and for Dundee, West (Mr. Ross)—whom I have the pleasure of following—expatiated on the benefits, as they saw them, to the citizens and ratepayers of Stevenage, of a Bill of this nature. But they should invite the borough council of Stevenage to do its sums again. It is absolutely clear, from the careful studies which have been made, and for which we are most indebted to the Under-Secretary of State for the Environment, that there is no way in which a financial exercise such as that


proposed by Stevenage new town, to purchase by borrowing moneys in the present money market at the current rates—between 14 and 15 per cent.—can do anything but lead the citizens of Stevenage into a debt from which they can never extract themselves.
The projected increases in rents for those who would become tenants are about 11½ per cent. per annum over the years or more than 400 per cent. over 10 years. That must be regarded as about as commercial as one can get. But even that would leave the citizens with an inexorable debt.
It is not surprising that clause 26 provides for precepts and makes it possible for the citizens to find their rates being mulcted to help the new Stevenage development authority out of its debt. But, far from receiving the museums and other benefits, to which the hon. Member for Dundee, West referred, the near certainty is that it would not be long before the Stevenage development authority and the borough council would be coming cap in hand to the Government to get themselves out of the financial mess into which they had plunged.
The right hon. Member for Sparkbrook referred to the pool. While the pool may currently be 9 per cent., that represents the low rates at which the authority may have borrowed historically over 20 or 25 years. If one adds the 14½ per cent. or more, which it would have to borrow now, those rates would go up and the benefits of the historic advantage of borrowing a long time ago would be negated.

Mr. Newens: I quoted those at 15 per cent.

Mr. Lyell: I am glad that the hon. Gentleman is turning his mind once again to the finances, because he will then be less likely to lead the citizens of the neighbouring new town astray.
The assets of the town were mentioned. This is important to the new town of Hemel Hempstead. For example, we have our water gardens and other cherished assets. We have car parks, which are currently free. We cherish those assets. I am glad to have the opportunity on behalf of my district council to press for a system to be established whereby the car parks, the water gardens and the other

cherished assets of Hemel Hempstead can, if it is thought wise by our local Draconean district council be brought into the ownership of that district council. But it would not be wise, in order to achieve that modest and sensible objective, to pile up the burden of an ill-thought-out scheme such as this Bill represents.
Those who, like me, represent new town constituences have been making representations on behalf of local business men that easier ways be found for them to purchase the properties that the Secretary of State, wisely in my opinion, wishes to transfer to the private sector. I received a sympathetic hearing from the Secretary of State and the Under-Secretary on this matter and considerable co-operation from the New Towns Commission. I do not know of any plans which have been brought to fruition. I know that negotiations are in progress and I hope that they will be brought to satisfactory fruition and that many local business men will have the opportunity to purchase their business premises at fair market prices. After all, that is all that anyone can reasonably expect.
It is important to say a word about the political views that underlie the presentation of this Bill. I recognise that they are sincerely held. However, it would be wrong if the people of Stevenage were to think that the benefits that are supposed to result from the management of such a large undertaking by the Stevenage development authority, which will include four members of the borough council, are likely to occur. All too often in the past five years we have seen the ill-effects of well-intentioned intervention by those with public sector responsibilities in matters that are properly the concern of the private sector. The steel industry has been mentioned in the debate more than once. The wrong decision was taken there many times by the previous Government.
We are doing the citizens of Stevenage a favour if we deny their district councillors and others the opportunity to be subjected to pressures which will inevitably lead to wrong decisions being taken in the name of humanity. I hope that my hon. Friends and hon. Gentlemen who reflect maturely on the Bill will join us in rejecting the Bill.

Mr. Guy Barnett: I congratulate my hon. Friend the Member


for Harlow (Mr. Newens) on his able and full introduction of the Bill.
In the short time available I wish to sketch in the history behind the introduction of the Bill. The pressure under which the Stevenage borough council found itself as a direct consequence of Government policies may not be clear to the House.
The best way to explain that is by referring to a reply given by my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) on 6 April 1977, when he was Secretary of State for the Environment. He set out the policy that the Government wanted to pursue in relation to new towns such as Stevenage. The House will recall that at that stage 16,000 houses built by the development corporation were transferred to the Stevenage borough council. I was largely responsible for that transfer, which took place with remarkable smoothness and co-operation on all sides, on behalf of the chairman, members and staff of the development corporation and of members and staff of the borough council. Those houses are being well managed, which reflects well on the way that the borough council has taken on a fairly massive responsibility in a short time.
The issue of industrial and commercial assets of many new towns, including Stevenage was naturally and properly raised. For that reason, my right hon. Friend in replying to the then hon. Member for Chorley had this to say:
the natural aspirations of local authorities to own and manage public sector property provided under the New Towns Act in their areas must be taken into account.
Later in the same reply my right hon. Friend said:
I will also consider whether a local authority should be able, in due course, to acquire commercial and industrial property from the Commission for the New Towns if it wished to do so and had the resources."—[Official Report, 6 April 1977; Vol. 929, c. 531.]
That was the policy which we wanted to pursue, but we were conscious of the fact that, with the considerable transfer of housing assets and the whole business of winding up the development corporation, there was a considerable administrative task to undertake and it was no time to add to that task the difficult problem of transferring, if local authori-

ties wished, industrial and commercial assets.
That is one reason why, while the policy was being worked out and the administrative job of winding up the corporations was being undertaken, we laid out the policy to make it possible for a borough council, such as Stevenage, which wanted to take on that responsibility—as many did—to do so.
Unfortunately, the present Government, in the need to satisfy their financial policies, have decided to sell the assets of the new towns to private interests as rapidly as possible. I oppose that proposal. Many Conservative Members have spoken about their understanding of the principle of the new towns, but one of the essential principles and one of the reasons for the success of the new towns is that since the new towns were founded, the corporations have had a general responsibility for housing, employment and planning of the new towns. They have been able to keep in harness the needs of the incoming population for housing and employment.
I intervened in the speech of the hon. Member for Hertford and Stevenage (Mr. Wells) to quote the example of Swindon, an authority which has done what Stevenage wants to do. On a visit to Swindon I was immensely impressed by the way in which the authority was managing commercial and industrial assets. It is not impossible for local authorities to do that, and Stevenage has chosen precisely the right mechanism for doing it.
In many ways, the local authority structure is not the right one for such management and the right solution is for the local council to set up the sort of authority described in the Bill.
Conservative Members may argue about the council's projections of the financial viability of its scheme. I do not believe that it is possible intelligently to debate such issues on the Floor of the House. They are better considered by a Select Committee studying the details of the legislation.
I commend to Conservative Members the suggestion that they should vote for the Bill and give a Select Committee responsibility for hearing evidence from both sides as to whether the proposition is viable.
If the Government are so sure that private interests are keen to buy property—and I have never come across any private interests that buy in the expectation of making a loss—I cannot understand why a local authority should not be equally capable of managing the assets successfully.
A number of development corporations have already used various ways of raising money, including the use of roll-over and the sale of leases for 125 years or 99 years, often receiving funds made available through pension funds and other bodies.
There is a variety of ways in which an authority of that kind could operate. Essentially the argument is not about whether this authority will be able to build museums, though I hope that it will be able to do so. What worries me intensely about the future of places such as Stevenage, Hemel Hempstead and others is that the job of development is not complete, as many Conservative Members have suggested. What they have not taken into account is that, rightly or wrongly, in the development that has taken place—as those who represent new towns will know—there is a serious second generation problem. It is a problem born of the fact that people of a certain age group were encouraged to move into these new towns and their children are now reaching the labour market. For that reason, it will be vitally important to involve a development corporation, a New Towns Commission or the local authority because it will not be possible for pension funds or property developers to give the attention that will be required to ensure sufficient industrial and commercial development of the town and to provide the jobs that will be necessary. Ideally it is a public authority that can do that most successfully.

Mr. Denshore Dover: Rubbish.

Mr. Barnett: It is not rubbish, because the evidence of Swindon is there. There is also evidence from other local authorities, including my own, which own and manage industrial land highly successfully. Indeed, one of the consequences of doing that is that the local authority has a feeling for the employment needs of the town which other local authorities may perhaps lack.
I end on this note, because I know that there is another hon. Member who wishes to speak before my hon. Friend the Member for Harlow (Mr. Newens) winds up for the Opposition. When I was in the Department of the Environment, discussing with experts in the property world and elsewhere the advice that we needed about assets of this kind, I was advised by a number of people, including estate agents, that the vital principle about the holding of property was to hold on to the freehold. Anyone in the property world—I am not in the property world—will give that advice. One needs to look only at the history of Letchworth to see the wisdom of that. One needs only to speak to anyone who runs a successful property company to know that that is the principle which is observed.
One of the disasters of the policy of the present Government, as I understand it, is that it will mean that commercial and industrial freeholds will go out of public ownership in total disregard of the kind of advice that I received when I was in the Department of the Environment.
Though the Bill will inevitably place great responsibilities on the borough council, I have faith that the borough council will be able to carry those responsibilities successfully. It is essential for the development of the town that the borough council should have these responsibilities. If there are doubts in the minds of some Conservative Members they should be argued out in a Select Committee and we should not attempt to deal with them in this type of debate.

Mr. Michael Morris: It is always a pleasure to listen to the hon. Member for Greenwich (Mr. Barnett) because although we may disagree with his analysis he understands what new towns are all about, which is in contrast to the contribution that we had from the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley). Clearly he does not understand what a new town is.
I do not think that any one of us challenges the genuineness of the approach of the Stevenage borough council. As I read the Bill and the propositions that the council put forward I think that I can say that they are full of ingenuity. They are conceptually—if I can put it that way


—a means of perpetuating the Stevenage development corporation in a new form for the 1980s.
Perhaps it is a little ironic, too, that Stevenage development corporation is the corporation that in many respects has been the body that has been sounded out by the Department of the Environment over the years about new developments in new towns. Perhaps we should not be surprised if some of that initiative has not arisen today in relation to this Bill.
The key point that many hon. Members have made is that new towns are a developing concept, and it is something of the nature of new towns that, across the Floor of the House, there has been a unanimity of approach in accepting that, over time, they have developed from a total ownership through to a partnership concept with the third generation new towns.
What the promoters of the Bill have to do is convince hon. Members that what they are putting forward is a better way of developing the future of Stevenage than the other opportunities that are available to that town. Indeed, it has to be a better way, because the implications of the Bill go far beyond Stevenage, as several hon. Members have said. They impinge on a new town such as mine, which is a third generation town, and the same applies to many other hon. Members.
Let us look at the statement that the Stevenage development authority sent to us. It is right that in the closing minutes of this debate we should look at some of the key issues.
We are asked, first, to ignore clause 10. It is easy for Opposition Members to say that we should now ignore that clause, but it was virtually the key part of the Bill until this evening. It was a total part of the municipalisation and the future of Stevenage. It is all right for hon. Members to smile, but it showed that the basic philosophy is one of total municipalisation. Having found resistance to that concept and having taken fright, they have dropped the clause. They have said "If we have a bit more, we shall drop clause 10."
Let us look at one or two of the key statements. Article 4 provides that the assets should be transferred to the local authority so that profits accruing from those assets might be used for the benefit

of the community that helped to create them. What Parliament must do—it has done this on several previous occasions—is to debate whether those assets belong to the local community there or to the wider community of the rest of the people who put in the money in the first place. That point has been debated in the House, and until this evening there has been a unanimous approach across the Floor of the House that the value built up in the assets belonged to the total community of this country and not to the individual local authority or the people who live in the area.
Secondly, article 6 of the statement contains this comment:
If a new town's assets were sold to private property developers and financial institutions this would create problems and would not assist it to become a normal town.
I have to say to those in Stevenage "Come to a third generation partnership town." That is not a problem in those towns, so why should it be a problem in Stevenage? If they would like to come from Stevenage to Northampton, I should be more than happy to persuade them that this works.
The development corporation has a point in article 7, when it says that it has not had an opportunity in the past because—particularly in relation to Stevenage and the earlier generation of new towns—it was unable to produce any partnership schemes with private developers. This may be a particular localised problem of Stevenage. I am sure that it is one to which my hon. Friend the Under-Secretary will wish to address himself in relation to the specific situation in Stevenage and perhaps one or two other new towns where this is a problem.
There is another point. Article 8 states:
Experience has shown that planning controls, unfortunately, are not sufficient to guarantee that future development takes place as and when it is needed.
That is absolute rubbish. I say to the people of Stevenage "Go and look at what has happened in Bedford." That is not a new town. It is a highly prosperous town, of a size similar to that of Stevenage. It has used solely the current planning facilities, and it has highly successful development. Therefore, that point is a load of rubbish.
It is said in article 10 that if the private sector is brought in it will not improve the quality of life in the town. I say to the people of Stevenage that the quality of life in a town depends on having a viable, profitable and successful town. What any town needs in today's difficult circumstances is viable industry, which pays good rates to the local authority and provides good jobs and good future prospects. In my experience that is provided by the private sector and not the public sector.
My hon. Friend the Under-Secretary of State has rightly drawn attention to the financial ineptitude of that which is proposed. Leaving that aside, my hon. Friends have made it clear, as we made it clear in opposition, that we believe that these commercial and industrial assets should be rolled over for the benefit of society generally. None of us should forget that the whole concept of the new town movement was to help the poor and deprived areas of London, Liverpool and Birmingham so that those living in those areas could move out to decent homes.
I say to the people of Stevenage, as I am prepared to say to the people of Northampton, "You now have decent assets, decent homes and decent factories. Those assets must be rolled over so that the money may be used for investment in other parts of the United Kingdom where there is still pressing need." We do not have the luxury of having no areas in need.
Having listened to all the contributions to the debate on Second Reading, the people of Stevenage should reflect and recognise that despite the genuineness of the hon. Member for Harlow (Mr. Newens), his concept is not in the interests of Stevenage. It would be far wiser to listen to my hon. Friend the Member for Hertford and Stevenage (Mr. Wells). He knows his constituency. He has consulted his constituents. He has no axe to grind. He is not building up any municipal empire. He has a totally objective viewpoint. The House would do well to listen to my hon. Friend's considered and measured speech. If he suggests that we should oppose the Bill, we should all oppose it.

Mr. Newens: I ask leave, Mr. Deputy Speaker to speak again.
It has been an interesting and serious debate, but we have heard not one argument of substance from the hon. Member for Northampton, South (Mr. Morris) or from any of his hon. Friends against the Bill. Conservative Members have not proved that the Bill is against the interests of the nation or against the interests of the residents of Stevenage. Indeed, it is clear that it is very much in the interests of everyone except the asset-strippers on the Tory Front Bench.
I am extremely grateful to my hon. Friends for their support. I felt especially sorry for the hon. Member for Hertford and Stevenage (Mr. Wells), who seemed to be living in a strange world.

Mr. Robert Atkins: No, the real world.

Mr. Newens: The hon. Gentleman spoke of the sovietisation of Stevenage. Are we being asked to believe that three of the four members of the Conservative group and members of the chamber of trade are so gullible as to vote for the sovietisation of their town? Against that background would the leader of the Tory group of the Stevenage borough council sit on the committee that drafted the Bill? Is that what we are asked to believe?
The hon. Gentleman's case was based on a series of similar fantasies and contentions without any serious foundation. He spoke of 400 per cent. rent increases. That is not so. He suggested that Stevenage could not borrow money at an interest rate of less than 18 per cent. My right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) pointed out that Stevenage can borrow at a long term rate of 15 per cent. The hon. Member for Hertford and Stevenage referred to an expensive public relations campaign. The department in Stevenage is equivalent to one and a half full time staff. It is unworthy to suggest that those people spent their time collecting children's signatures for a petition. As he well knows, in the vast majority of cases the petition was signed by responsible adults, members of his constituency.
It is clear that the Bill has immense support in the town. The hon. Gentleman remarked on the aims of Ebenezer Howard. There is no doubt that he believed that the assets of a new town


should be owned by the community. That is precisely the aim of this Bill.
The Under-Secretary's case was not much better. My right hon. Friend the Member for Sparkbrook reduced him to such a state that he was unable or unwilling to give an answer about the Minister's power to demand sales. He took refuge behind the statement that my right hon. Friend should table a parliamentary question. He was not prepared to give an answer. He dreamt up some figures that purported to show that the town would be faced by an escalating debt after nine or 10 years. If these assets are loss-makers, why does he expect investment trusts and pension funds to be interested in buying them?
The Under-Secretary wants to have it both ways. He argues that the people of Stevenage will be worse off, but that the nation will lose valuable assets. The community in Letchworth has benefited enormously. There is no reason for disbelieving that Stevenage would benefit. The only reason for opposing the Bill is, as the Under-Secretary said, that it is directly contrary to Government policy. The hon. Member for Hertford and Stevenage recognised the difficulties of small business men who want to buy their

premises. He also recognised that the council does not own the assets that it should.

The hon. Gentleman should realise that there is little chance of achieving any change in the Government's policy. His remarks about the plight of small business men and others illustrates the need for change. If it is true, as the Under-Secretary said, that there is no Whip and if hon. Members are about to make up their minds on the merits of the case, I appeal to them to give the Bill a Second Reading. It can be amended at a later stage. If hon. Members do not like the provisions to which the hon. Member for Northampton, South referred, they can be withdrawn at Committee stage. Hon. Members could still vote against the Bill at a later stage.

This Bill has had a tremendous case advanced for it. I appeal to right hon. and hon. Members on both sides of the House to give it a chance, and let it have a Second Reading.

Question put, That the Bill be now read a Second time:—

The House divided: Ayes 158, Noes 216.

Division No. 248]
AYES
[10 pm


Adams, Allen
Dubs, Alfred
John, Brynmor


Allaun, Frank
Dunnett, Jack
Johnson, James (Hull West)


Alton, David
Dunwoody, Mrs Gwyneth
Jones, Rt Hon Alec (Rhondda)


Atkinson, Norman (H'gey, Tott'ham)
Eadie, Alex
Jones, Barry (East Flint)


Barnett, Guy (Greenwich)
Eastham, Ken
Kaufman, Rt Hon Gerald


Benn, Rt Hon Anthony Wedgwood
Edwards, Robert (Wolv SE)
Kerr, Russell


Bidwell, Sydney
Ellis, Raymond (NE Derbyshire)
Lamborn, Harry


Booth, Rt Hon Albert
English, Michael
Lamond, James


Bottomley, Rt Hon Arthur (M'brough)
Evans, Ioan (Aberdare)
Leadbitter, Ted


Bray, Dr Jeremy
Evans, John (Newton)
Lestor, Miss Joan (Eton &amp; Slough)


Brown, Hugh D. (Provan)
Ewing, Harry
Lewis, Arthur (Newham North West)


Brown, Ronald W. (Hackney S)
Faulds, Andrew
Litherland, Robert


Callaghan, Jim (Middleton &amp; P)
Field, Frank
Lyons, Edward (Bradford West)


Campbell, Ian
Fitt, Gerard
McCartney, Hugh


Campbell-Savours, Dale
Fletcher, L. R. (Ilkeston)
McDonald, Dr Oonagh


Canavan, Dennis
Fletcher, Ted (Darlington)
McElhone, Frank


Cant, R. B.
Foot, Rt Hon Michael
McKay, Allen (Penistone)


Carter-Jones, Lewis
Ford, Ben
McKelvey, William


Cartwright, John
Foster, Derek
McNally, Thomas


Clark, Dr David (South Shields)
Foulkes, George
McWilliam, John


Cocks, Rt Hon Michael (Bristol S)
Fraser, John (Lambeth, Norwood)
Marshall, Dr Edmund (Goole)


Coleman, Donald
George, Bruce
Martin, Michael (Gl'gow, Springb'rn)


Cook, Robin F.
Gilbert, Rt Hon Dr John
Mason, Rt Hon Roy


Cowans, Harry
Golding, John
Maxton, John


Crowther, J. S.
Graham, Ted
Maynard, Miss Joan


Cryer, Bob
Grant, John (Islington C)
Mikardo, Ian


Cunningham, George (Islington S)
Hamilton, James (Bothwell)
Millan, Rt Hon Bruce


Dalyell, Tam
Hamilton, W. W. (Central Fife)
Miller, Dr M. S. (East Kilbride)


Davies, Ifor (Gower)
Harrison, Rt Hon Walter
Mitchell, Austin (Grimsby)


Davis, Clinton (Hackney Central)
Hattersley, Rt Hon Roy
Mitchell, R. C. (Soton, Itchen)


Davis, Terry (B'rm'ham, Stechford)
Haynes, Frank
Morris, Rt Hon Charles (Openshaw)


Deakins, Eric
Hogg, Norman (E Dunbartonshire)
Morton, George


Dean, Joseph (Leeds West)
Home Robertson, John
Newens, Stanley


Dewar, Donald
Homewood, William
Oakes, Rt Hon Gordon


Dixon, Donald
Hooley, Frank
O'Neill, Martin


Douglas, Dick
Horam, John
Orme, Rt Hon Stanley


Douglas-Mann, Bruce
Jay, Rt Hon Douglas
Owen, Rt Hon Dr David




Palmer, Arthur
Silkin, Rt Hon S.C. (Dulwich)
Torney, Tom


Park, George
Silverman, Julius
Urwin, Rt Hon Tom


Parker, John
Smith, Rt Hon J. (North Lanarkshire)
Walker, Rt Hon Harold (Doncaster)


Pavitt, Laurie
Snape, Peter
Watkins, David


Pendry, Tom
Soley, Clive
Weetch, Ken


Penhaligon, David
Spearing, Nigel
Welsh, Michael


Powell, Raymond (Ogmore)
Spriggs, Leslie
White, Frank R. (Bury &amp; Radcliffe)


Prescott, John
Stallard, A. W.
Whitlock, William


Race, Reg
Steel, Rt Hon David
Willey, Rt Hon Frederick


Richardson, Jo
Stoddart, David
Wilson, William (Coventry SE)


Roberts, Albert (Normanton)
Strang, Gavin
Winnick, David


Robertson, George
Taylor, Mrs Ann (Bolton West)
Woolmer, Kenneth


Ross, Ernest (Dundee West)
Thomas, Jeffrey (Abertillery)
Wrigglesworth, Ian


Rowlands, Ted
Thomas, Mike (Newcastle East)



Sheerman, Barry
Thorne, Stan (Preston South)
TELLERS FOR THE AYES:


Shore, Rt Hon Peter (Step and Pop)
Tilley, John
Mr. Philip Whitehead and


Silkin, Rt Hon John (Deptford)
Tinn, James
Mr. Martin Flannery.


NOES


Alexander, Richard
Fowler, Rt Hon Norman
Maxwell-Hyslop, Robin


Alison, Michael
Fox, Marcus
Mayhew, Patrick


Ancram, Michael
Fraser, Peter (South Angus)
Mellor, David


Aspinwall, Jack
Garel-Jones, Tristan
Meyer, Sir Anthony


Atkins, Robert (Preston North)
Gilmour, Rt Hon Sir Ian
Miller, Hal (Bromsgrove &amp; Redditch)


Atkinson, David (B'mouth, East)
Goodhew, Victor
Mills, Iain (Meriden)


Baker, Kenneth (St. Marylebone)
Goodlad, Alastair
Mitchell, David (Basingstoke)


Baker, Nicholas (North Dorset)
Gorst, John
Moate, Roger


Banks, Robert
Gow, Ian
Monro, Hector


Beaumont-Dark, Anthony
Gower, Sir Raymond
Morgan, Geraint


Bendall, Vivian
Gray, Hamish
Morris, Michael (Northampton, Sth)


Bennett, Sir Frederic (Torbay)
Greenway, Harry
Morrison, Hon Charles (Devizes)


Benyon, Thomas (Abingdon)
Grieve, Percy
Morrison, Hon Peter (City of Chester)


Benyon, W. (Buckingham)
Griffiths, Eldon (Bury St Edmunds)
Mudd, David


Berry, Hon Anthony
Griffiths, Peter (Portsmouth N)
Myles, David


Best, Keith
Grist, Ian
Neale, Gerrard


Bevan, David Gilroy
Grylls, Michael
Needham, Richard


Biggs-Davison, John
Gummer, John Selwyn
Newton, Tony


Blackburn, John
Hamilton, Hon Archie (Eps'm&amp;Ew'll)
Nott, Rt Hon John


Blaker, Peter
Hamilton, Michael (Salisbury)
Page, Rt Hon Sir R. Graham


Boscawen, Hon Robert
Hampson, Dr Keith
Page, Richard (SW Hertfordshire)


Bottomley, Peter (Woolwich West)
Hannam, John
Parkinson, Cecil


Boyson, Dr Rhodes
Hastings, Stephen
Parris, Matthew


Braine, Sir Bernard
Hawkins, Paul
Patten, Christopher (Bath)


Bright, Graham
Hawksley, Warren
Pawsey, James


Brinton, Tim
Henderson, Barry
Percival, Sir Ian


Brittan, Leon
Hicks, Robert
Peyton, Rt Hon John


Brooke, Hon Peter
Hill, James
Pollock, Alexander


Brotherton, Michael
Hogg, Hon Douglas (Grantham)
Prior, Rt Hon James


Browne, John (Winchester)
Hooson, Tom
Proctor, K. Harvey


Bruce-Gardyne, John
Hordern, Peter
Raison, Timothy


Budgen, Nick
Howell, Rt Hon David (Guildford)
Rees-Davies, W. R.


Bulmer, Esmond
Howell, Ralph (North Norfolk)
Rhodes James, Robert


Butler, Hon Adam
Hunt, David (Wirral)
Ridley, Hon Nicholas


Cadbury, Jocelyn
Hurd, Hon Douglas
Roberts, Michael (Cardiff NW)


Carlisle, John (Luton West)
Jenkin, Rt Hon Patrick
Roberts, Wyn (Conway)


Carlisle, Kenneth (Lincoln)
Johnson Smith, Geoffrey
Ross, Wm. (Londonderry)


Carlisle, Rt Hon Mark (Runcorn)
Jopling, Rt Hon Michael
Rossi, Hugh


Chalker, Mrs Lynda
Joseph, Rt Hon Sir Keith
Sainsbury, Hon Timothy


Channon, Paul
King, Rt Hon Tom
Scott, Nicholas


Chapman, Sydney
Kitson, Sir Timothy
Shaw, Michael (Scarborough)


Clark, Sir William (Croydon South)
Knight, Mrs Jill
Shepherd Colin (Hereford)


Clarke, Kenneth (Rushcliffe)
Knox, David
Shepherd, Richard (Aldridge-Br-hills)


Cope, John
Lamont, Norman
Shersby, Michael


Costain, A. P.
Lang,Ian
Skeet, T. H. H.


Crouch, David
Latham, Michael
Speed, Keith


Dean, Paul (North Somerset)
Lawrence, Ivan
Speller Tony


Dorrell, Stephen
Lee, John
Spence, John


Douglas-Hamilton, Lord James
Le Marchant, Spencer
Spicer, Michael (S Worcestershire)


du Cann, Rt Hon Edward
Lennox-Boyd, Hon Mark
Sproat, Iain


Dunn, Robert (Dartford)
Lester, Jim (Beeston)
Stainton, Keith


Eden, Rt Hon Sir John
Lloyd, Peter (Fareham)
Stanbrook, Ivor


Edwards, Rt Hon N. (Pembroke)
Loveridge, John
Stanley, John


Emery, Peter
Luce, Richard
Steen, Anthony


Fairbairn, Nicholas
Lyell, Nicholas
Stevens, Martin


Fairgrieve, Russell
MacGregor, John
Stewart, Ian (Hitchin)


Faith, Mrs Sheila
McNair-Wilson, Michael (Newbury)
Stewart, John (East Renfrewshire)


Farr, John
McQuarrie, Albert
Stradling Thomas, J.


Fenner, Mrs Peggy
Major, John
Tebbit, Norman


Finsberg, Geoffrey
Marlow, Tony
Temple-Morris, Peter


Fisher, Sir Nigel
Marshall, Michael (Arundel)
Thatcher, Rt Hon Mrs Margaret


Fletcher, Alexander (Edinburgh N)
Mates, Michael
Thompson, Donald


Fletcher-Cooke, Charles
Mather, Carol
Thorne, Nell (Ilford South)


Fookes, Miss Janet
Maude, Rt Hon Angus
Thornton, Malcolm


Forman, Nigel
Mawhinney, Dr Brian
Townsend, Cyril D. (Bexleyheath)




Trotter, Neville
Ward, John
Winterton, Nicholas


Vaughan, Dr Gerard
Watson, John
Wolfson, Mark


Viggers, Peter
Wells, Bowen (Hert'rd &amp; Stev'nage)
Young, Sir George (Acton)


Waddington. David
Wheeler, John
Younger, Rt Hon George


Wakeham, John
Whitney, Raymond



Waldegrave, Hon William
Wickenden, Keith
TELLERS FOR THE NOES:


Walker-Smith, Rt Hon Sir Derek
Wiggin, Jerry
Mr. Christopher Murphy and


Waller, Gary
Williams, Delwyn (Montgomery)
Mr. Den Dover.


Walters, Dennis

Question accordingly negatived.

WAYS AND MEANS

AMENDMENT OF THE LAW

Postponed proceeding resumed.

It being after Ten o'clock, the debate stood adjourned.

Debate to be resumed tomorrow.

EUROPEAN COMMUNITY (WORKER PROTECTION)

[Relevant document: Department of Employment's supplementary explanatory memorandum of 24 March 1980.]

The Under-Secretary of State for Employment (Mr. Patrick Mayhew): I beg to move,
That this House takes note of European Community document 5394/79 for a Council Directive on the protection of workers from harmful exposure to chemical, physical and biological agents at work.
This document is a letter dated 9 March 1979 from the Commission to the President of the Council of Ministers, enclosing a proposal for a Council directive, itself bearing Commission reference "COM(79) 83 final" and dated 2 March.
This was the subject of the Department of Employment explanatory memorandum to Parliament, dated 26 June 1979. Since that date the proposal has been examined by the Select Comittee on European legislation, which reported on 24 October, and it has been extensively discussed at Brussels in the Council working group with a view to agreement on a text for approval by the Council of Ministers.
It is to explain the progress of those discussions that the supplementary explanatory memorandum dated 24 March 1980 has been submitted to Parliament, to which is attached, for convenience, an informal text to illustrate the current content of the draft proposal.
I shall explain how the draft directive originated. In June 1978 the Council of Ministers of the European Community resolved on an action programe of health and safety at work. One of its general objectives is that exposure to occupational risks of all workers within the European Community be kept to permissible levels based upon common concepts and references.
It also proposes that there should be harmonisation of measures for the protection of workers with respect to chemical, physical and biological agents—that is to say, harmful substances or conditions. In effect, that means anything that could be harmful to health.
Accordingly, in March 1979 the Commission proposed a Council directive and prepared the Commission's proposal circulated under cover of Council document 5394/79. It is known in the trade as a "draft framework directive"—that is to say, it provides the framework within which further specific Community legislation may be made and under which member countries may make regulations of their own.
I shall next describe how the directive will take effect. It requires member States to take appropriate measures to ensure that exposure of workers to harmful agents is kept as low as can reasonably be achieved.
In respect of 14 specific agents listed in annex 1, article 5 calls for special measures. These are concerned with medical supervision of workers, access to the results of measurements and the provision of information and documentation available at national and community levels.
Article 6 provides for consultation with workers in regard to the proposed safety measures for suitable economic safeguards for workers removed from exposure to any harmful agent and for ensuring that the measures taken will not produce any unduly adverse effects elsewhere.
It is proposed that a series of draft special directives on further specific requirements for those agents listed in annex 1 will follow. The draft directive further provides, by article 9, for the establishment of an
'Industrial Medicine and Hygiene Committee' of the member States' representatives, which will have power to elaborate and adapt to progress technical aspects of the provisions of Article 4 and the equivalent provisions of Article 5.
The House will therefore see that the broad purpose of the draft directive is to achieve for the Community as a whole—in respect of harmful substances and conditions—the essence of what Parliament achieved for the United Kingdom when it passed the Health and Safety at Work, etc. Act 1974.

Mr. Tam Dalyell: Will the hon. and learned Gentleman make clear in what way this directive improves on the Health and Safety at Work, etc. Act 1974? What benefit do we get from


this directive that we do not already get from the Act?

Mr. Mayhew: There is virtually no change. The Health and Safety at Work, etc. Act 1974 achieved for this country the essence of what is sought to be achieved by the draft directive that we are discussing. Accordingly—I shall come to this in more detail later—the desirability or otherwise of this directive from the point of view of the interests of the United Kingdom is to be seen in terms of harmonisation.
Industries in this country that already have to comply with the obligations imposed upon them by the Health and Safety at Work etc. Act have an obvious economic interest in seeing that competitor industries in the Community do not have to meet less stringent obligations.

Mr. Tony Marlow: I understand from a brief examination of the document that other member countries of the Community will, if they wish, be able to introduce even stronger measures of their own. If that happens, will those member countries be able to say that if we do not adopt their measures, they will not accept our exports because our specifications are not up to their standards?

Mr. Mayhew: That is not entirely accurate. My hon. Friend the Member for Northampton, North (Mr. Marlow) says that other countries will be able to introduce more stringent measures. That is correct. They can do that under domestic legislation. However, other member countries will be able to propose to the Commission more stringent measures under the directive. They will not be able to secure more stringent measures unless the Council of Ministers approves them. Any member of the Council of Ministers has a de facto right to veto a Commission proposal.
The Health and Safety at Work etc. Act is intended to protect people at work and others affected by work activities. It lays down general duties for employers, the self-employed and workers. It gives powers to make subordinate legislation. From the outset there appeared to the Government to be much to be said for the principle of a framework directive, the general thrust of which was to apply to all our European partners the prin-

ciples that we had already applied to ourselves.

Mr. John Grant: I am puzzled about what the Minister said about the impact on United Kingdom law. The early memorandum says that it could be necessary to introduce regulations under section 15 of the Health and Safety Work etc. Act or approved codes of practice under section 16. The memorandum refers to policy implications and states that our legislation
does not however specifically require in the case of the listed agents, all of the additional protection such as formal medical supervision set out in Article 5.
That seems to conflict with what the Minister said, although it tallies with my understanding of the directive.

Mr. Mayhew: The hon. Member for Islington, Central (Mr. Grant) accurately quotes from the June memorandum. I shall explain the course that discussions have taken in the Council of Ministers working group. I said that the impact would be slight. That is because the standard that the Act imposes upon British employers is reasonably practical for safety. That does not mean that there may not be ancillary changes in the law imposed here. However, the main thrust of the directive is to impose a more stringent standard of care in respect of exposure to harmful agents than is imposed by the Act.
The directive is being put to the House so that members of the working group in Europe know hon. Members' views on how best to achieve proper standards.

Mr. Bob Cryer: Is there not a difference between the existing United Kingdom practice and the directive? The directive lists a number of harmful substances, whereas the Health and Safety Executive has refused to list grade 1 and 2 carcinogens, even to inspectors. Surely, listing harmful substances is a significant step forward.

Mr. Mayhew: I shall come to that. The directive in its original text in article 3 states:
Member States shall take appropriate measures to ensure that exposure of workers to agents shall be kept as low as can be reasonably achieved.
"Agents" means harmful agents. It is true that in annex 1 there is set out a


list of 14 specific agents in respect of which article 5 states that
in addition to those measures laid down in Articles 3 and 4",
in respect of those agents set out in article 5 the measures which the member States shall take shall
ensure that medical supervision of workers is provided prior to exposure
and so forth. It goes on to say:
To assist them with the interpretation of the results and to further inform them of the potential hazards of the agents specifically prepared information and documentation at national and/or Community levels shall be made available.
It therefore spells out in black and white what the measures that may be taken by member States shall include What I am saying is that none of those, as I am advised, goes outside what would already be required, under the Health and Safety at Work etc. Act 1974, of any employer in this country. In other words, it is specific in the sense that it identifies certain agents, but in this country it is a matter of fact in each case whether or not an employer has taken the act that is required of him in fulfilment of his general duty in respect of any particular harmful agent with which his operations are concerned.
I was saying that from the outset there appeared to the Government to be a good deal to be said for the principle of the framework directive whose general thrust was to apply to all our European partners principles that we had already in this country applied to ourselves.
The Scrutiny Committee of Parliament duly considered the draft proposal and reported on 24 October last year. It reported some doubt about the need for legislation on the lines proposed. It reported criticism of the way in which the proposed industrial medicine and hygiene committee was to operate. It reported criticism of the detailed drafting of the document, and it questioned the vires of the directive in relation to article 100 of the Treaty of Rome.
The Government, in order to establish views within the United Kingdom, consulted the CBI, the TUC, trade associations, the Health and Safety Commission, and Government Departments. This consultation will continue as the draft directive progresses through the Council machinery.

Mr. Dalyell: As a member of the Scrutiny Committee, I suppose that I led the questioning of the medicine committee, and it was partly because the late Professor Robson, the former vice-chancellor of Edinburgh university, who was a member of some of the medicines committees in Brussels, expressed considerable criticism about their effectiveness. Against that background, I should like to ask whether these committees, for all their meetings—bringing distinguished men from all corners of Europe to Brussels—achieve very much. Certainly Professor Robson, before he suddenly died, was very doubtful about the usefulness of the committees on which he served.

Mr. Mayhew: The answer to that will depend upon the final form of the draft proposal. Under the original text of the draft proposal the function of this technical committee—the industrial medicine and hygiene committee—was proposed to be very wide, or much wider, at any rate. It was proposed that it should have the function of advising the Commission on technical matters and of advising the Commission on any changes or adaptations to regulations or to directives that it might think necessary in the light of technical changes and advances.
As I shall explain to the House, in the course of discussions in the working group it now appears that the final recommendation will be that the jurisdiction of the committee will be much narrower and will be related only to those harmful agents in respect of which special directives will have been made by the Commission.
I do not know whether this committee is likely to be of value, but there is value in special technical committees to advise the Commission on narrowly technical matters. It is important that they should not, as it were, have jurisdiction to change the substance of directives or of legislation, but that is not proposed in this draft directive.

Mr. Marlow: According to what my hon. and learned Friend said, it seems that the Scrutiny Committee has criticised almost every aspect of this directive and has damned it with faint praise at best, including criticising its legality. Therefore, will my hon. and learned Friend tell me why we are discussing it tonight?

Mr. Mayhew: I shall do so, but if I keep giving way I shall have some difficulty. My hon. Friend should have listened a little more carefully. I said that the Scrutiny Committee reported some doubt about the need for the legislation, criticism of the way in which the committee was to operate, and criticism of the detailed drafting of the document, and it questioned whether it was intra vires article 100 of the Treaty of Rome.
I acknowledge the Scrutiny Committee's work in eliciting the views of a wide range of United Kingdom interests. In our inquiries the general reaction has been one of welcome for the objectives of the directive, and no adverse comment has been made on its main principles. Naturally there has been some criticism, but that has mainly been on points of detail, such as the precise meaning of the terminology used in articles 3 and 4.
Discussions in the working group in Brussels have resulted in the Commission's intentions becoming clearer, and this is reflected in the latest text, which is annexed to the explanatory memorandum, dated 24 March. Accordingly, consultation appeared to the Government to confirm the need for a directive on these principles—the first of the questions raised by the Scrutiny Committee. In the Council of Ministers' working group the Government have supported the general principle of a framework directive subject to two provisos: first, that no article of the directive shall impose requirements more stringent than those in force in the United Kingdom at present and, secondly, that no action will be necessary in respect of the agents listed in annex 1 of the directive as a consequence of article 5 until special directives have been adopted.

Mr. Cryer: Does not that reservation mean that article 5 is rendered obsolete? The article states that member States shall do something. That is an absolute duty. The Health and Safety at Work etc. Act 1974 lays down a qualifying duty: that an employer shall carry out duties so far as is reasonably practicable. That is a very marked difference. If the position in the negotiations is that duties shall be carried out only so far as reasonably practicable, that will erode the principle of article 5.

Mr. Mayhew: Article 5, which I have already quoted from the original text, states that, in respect of annex 1 substances, in addition to article 4 measures the following measures—which are set out, and I can begin with the medical supervision of workers—shall be included and shall ensure that medical supervision is provided.
As I indicated, the line taken by the Government in the Council of Ministers' working group has been to support the principle, subject to the two qualifications to which I referred. The Government now wish to hear what the House has to say about that matter.
I turn now to the second of the matters raised by the Scrutiny Committee, namely, the technical committee that article 9 of the draft directive proposes shall be set up, to be called, under the original draft proposal, the industrial medicine and hygiene committee. It will consist of representatives of the member States with a representative of the Commission as chairman.
Obviously, much of the work concerned with elimination or reduction of exposures will be of a highly technical nature. It is for that reason that the draft directive provides, by article 9, for the setting up of a technical progress committee such as this, which will advise the Commission and the Council of Ministers on technical aspects and, where necessary, propose adaptations regarding the matters set out in annex 2 in the light of technical change. If the measures accord with the majority opinion of the committee, the Commision shall proceed to impose these measures. If there is, on the other hand, a difference of opinion, the matters shall be decided by the Council of Ministers.
Concern was expressed to the Select Committee at the powers to be given to this committee. Hon. Members will know that such committees have been established by many directives.

Mr. Dalyell: Which Select Committee?

Mr. Mayhew: The Scrutiny Committee.
The important issue in my opinion is whether the committee is restricted to purely technical matters or is given a remit that allows it to enter into substantive issues properly for decision by the Council of Ministers.
The latest indications in the Council of Ministers' working group are that the jurisdiction of the technical committee will be restricted to special directives only, as distinct from the framework directive, and in those directives there may be further limitation of its powers. The Government will value the views of this House on that aspect of the draft directive.
I now turn to a number of detailed issues, including criticisms made in the course of scrutiny. The first concerns loss of jobs and compensation of workers. The question of guarantees, under article 6, for workers who may be temporarily removed from their jobs to prevent further exposure to harmful agents is one area in which United Kingdom law might need reinforcement. The European Commission has used the term "undue prejudice" in this document, which is its attempt to write into the directive provisions that equate with ILO convention No. 148, which deals with air pollution, noise and vibration. Article 11(3) of that convention makes provision for a worker to be found alternative employment or to have his income maintained through social security measures or otherwise in cases where continued exposure at work is considered to be medically inadvisable. The United Kingdom ratified the convention with respect to air pollution in March 1979.
I would not dissent from the intention of such a provision, because it is in accord with the spirit of the ILO convention. No one wishes to see any worker or his family suffer in those circumstances. Nevertheless, it is uncertain whether what is essentially a wide employment and social security issue should be included in a directive, the purpose of which is to safeguard the health of people at work.
On matters of environment and public health dealt with by article 6, measures taken to protect the health of people at work should not result in the public being put at risk or the environment being polluted, for example, by harmful materials removed from the work place being deposited elsewhere or workers taking home contaminated clothing. The provisions of article 6 seek to ensure that by ensuring that the requirements of the directive are consistent with those in other directives dealing with the pro-

tection of the environment and public health.
The use of medical resources is dealt with in articles 4 and 5. Articles 4 and 5 of the original draft refer to medical supervision of workers likely to be exposed at work to risks from harmful agents. The latest text requires the consideration of the need for "surveillance of workers' health" in all cases, taking account of the nature of the agent, extent of exposure, gravity of risks and the degree of urgency that a member State attaches to such surveillance in relation to the agent under consideration. Medical surveillance need not necessarily be undertaken by a doctor in every case, but it must be by a doctor in the case of those specific agents to which article 5 applies.
I turn finally to the question of vires and article 100. The issue raised by the Select Committee is whether this directive represents proper use of article 100 of the Treaty of Rome, on which it is based and which requires that the directives shall be issued for the approximation of such provisions laid down by law, regulation or administrative action in the member States as directly affecting the establishment or functioning of the Common Market.
First, I believe that it is clear that the proposed directive would remove differences in standards of worker protection among member States, which undoubtedly are of economic importance as they affect the competitive position of manufacturers. It is for that reason that United Kingdom employers are ready to support the proposal, since in the United Kingdom they are already required to provide protection broadly as the directive would require. The council of the European Communities legal services is also of the opinion that the directive aims to avoid disparities and also to pave the way for furture harmonisation, that the provisions have a direct impact on the operation of the Common Market and that the area under consideration is one of those governed by the Treaty for which the Community is competent.
The then Lord Chancellor, Lord Elwyn Jones, in a debate on the EEC 22nd and 35th reports on the approximation of laws, said:
Where it is a question of ensuring appropriate standards of safety, health and hygiene,


few I think would question that these must directly affect the operation of the Common Market."—[Official Report, House of Lords, 4 July 1978; Vol. 394, c. 904.]
I add that there are precedents for the use of article 100 for the protection of workers.
Basing the directive on article 100 creates a danger that harmonisation will take place on the lowest common denominator. We must therefore retain the right to set higher standards if we consider it necessary and the new article 7 in the informal working text is intended to achieve that objective.
To sum up, we have in the United Kingdom a comprehensive range of statutes already providing protection for people at work, and they are often the admiration of other countries. The latest draft of the directive is an improvement on the earlier text and now incorporates the main principles of protection of workers' health already applied in this country. Nevertheless, we cannot be entirely sure that our own legislation will prove to be adequate to meet the directive, though I have already indicated the Government's view on the proposed draft. Much will depend on the final text.
When special directives are promulgated by the Commission we shall be able to influence what each directive requires, and it may be necessary to introduce regulations under section 15 of the Health and Safety at Work etc. Act in some cases. Again, it will depend on the precise wording of the directives.
The main thrust of the draft directive is to harmonise on a Community basis the control of harmful agents at work. The Government desire to have the views of the House at this stage of its development so that our negotiating team may best assist the directive to attain that desirable objective.

Mr. Dalyell: The Minister has been landed with a lousy brief. Does he think that evidence was presented to the Scrutiny Committee to enable a group of his parliamentary colleagues to evaluate these matters? That is not the nature of the Scrutiny Committee. It can judge only whether a matter should come to the Floor of the House. The impression must not be given to our colleagues that the Scrutiny Committee has deliberated

in any depth on the merits of the issues.
I got the impression from the brief, as did some of my hon. Friends, that the Minister thought that the Scrutiny Committee had passed a qualitative judgment on the issues that we are discussing. That is not so.

Mr Mayhew: I am sorry if I gave that impression. I think that I am clear about the basis on which the Scrutiny Committee does its job. The hon. Gentleman will recall that in the report of the Committee on 24th October last year an annex set out a resumé of evidence given to the Committee by four or five bodies. I therefore said that the Committee had reported criticism of certain matters. The Committee itself said that Parliament might wish to consider whether this matter was a proper use of article 100.

Mr. John Grant: On behalf of the Opposition, I welcome the framework directive. It is the most important and wide-ranging measure so far proposed by the EEC on occupational health and safety. I know that that is also the view of the TUC and, I believe, employers.
I gather that the list of harmful agents that the directive contains will be expanded in line with the EEC action programme that was previously agreed by the Council of Ministers. I was keen to see that programme promoted during the three years when I attended the labour and social affairs council on behalf of the British Government and when I had ministerial responsibility for health and safety.
In welcoming this draft directive tonight, the Government have expressed the opinion that they will not have to do anything about it. I want to suggest—indeed, I already have—that some of the proposals in the directive would mean changes in practice and improvements. Indeed, in his closing remarks I think the Minister conceded that the main thrust—as he puts it—of our health and safety law will remain unchanged. That may be so. Nevertheless, there will be some important changes. I do not think that the Minister has done justice to that in his remarks.
The directive has a wide scope. It deals with improvements of standards at planned as well as existing workplaces,


greater consultation on safety at the industrial design stage, improved training and information, more monitoring of conditions at the workplace, more statistics, and so on. I can see why the Commission wants enabling-type legislation, supplemented by individual directives.
I want to pose a series of questions to the Minister. This is not a complaint in any sense, but I wonder whether he can tell us how the House will be consulted on the individual directives that will come forward within the framework directive. As he himself said, the framework directive has a fairly simple objective, which is to prevent risks to workers from chemical and other agents. It is a comprehensive directive.
The Minister's acceptance of the advances that I believe will be contained in the directive has been extremely reluctant. I shall later suggest why that is, but first I want to press the Minister on some specific points that will help to illustrate my remark that changes will be necessary.
I take it that the requirement in article 6 that workers or their representatives should be involved in discussions on the results of monitoring and safety systems at work will fit into the pattern of safety committees that the previous Government established as a statutory right. But there is one potentially important difference in relation to current practice. Article 6 indirectly mentions the environment and says that measures taken under the directive should not lead to undue effects outside the workplace. It would be helpful if the Minister could say something in amplification of that, because we have doubts about what is contained in the explanatory memorandum and about the possible role of the Secretary of State for the Environment in this context.
Could the directive be developed to deal with the handling and disposal of toxic waste, or the provision of information by those public bodies concerned with the environment about the risks involved and the precautions taken by the employer? We need some clarification. It may be that the article needs to be much more specific, but there are clearly implications here for the United Kingdom.
There is also the question of the list of agents mentioned in annex 1, which my

hon. Friend the Member for Keighley (Mr. Cryer) has already mentioned. The inspection of records also poses a major question. I shall take a couple of examples that are not in the list but that I presume could be added by a special directive. There has been a good deal of concern about access to records concerning the effects of radiation. It would seem that if a special directive were implemented, more access to such information would be possible.
Another topical example is the weed-killer 2,4,5-T and dioxin and the poison that it contains. There has been increasing anxiety about this in many quarters, including the continuing concern about the health of workers at Bolsover, where it is made. As I understand it, the Health and Safety Executive has experienced difficulty in the past in obtaining details from the firm concerned—Coalite and Chemical Products Ltd—about the medical records of the men concerned.
Presumably, if there were a directive that covered this sort of chemical, that would take care of that situation. The explanatory memorandum refers to possible implications for the Secretary of State for Social Services in relation to medical supervision and surveillance, as the Minister mentioned. In pressing the Minister on this matter I may be a little unfair. It may be too early, but I wonder whether the Government have any intention, on the basis of advice from the Health and Safety Executive at this stage, to consider pressing for an early addition to the list in respect of dioxin, or, for that matter, radiation. We have a shopping list within the directive. Do the Government, at this stage, have their own reserve shopping list of other dangerous chemicals, and so on, that they would wish to see added to that list?
What is the position with regard to seafarers? Does the framework directive extend to them? If it does not, why not? This question has worried the unions. It has been of concern to the TUC. It would be helpful to have an answer.
Articles 9 and 10 contain the technical committee proposals to which the Minister referred. He talked about narrower guidelines for the technical committee. It is right that they have been changed. As I understand it, again it would consist of Government experts, and it would exclude


worker representatives and any opportunity for them to influence the structure or shape or the standards of future EEC proposals, if the directive had gone through in its earlier form, at any rate. That would have seemed to cut across the tripartite nature of decision-making in the Community. That is always claimed to be an integral feature of the Community approach.
It would seem best if the technical committee could stick to technical matters and leave policy decisions to the advisory committee on safety, hygiene and health at work, and, indeed, to the Council. The latest explanatory memorandum seems to suggest that that will now be the case, and I think that the Minister was saying that in fact that is so and that that point had been taken care of.
On the question of timing, the presidency was hoping that the framework directive would be adopted in June. Is that the Government's expectation?
My final and major point is a very different one. It takes us back to the question why the Government have welcomed the directive on the basis that they will not have to do anything about it. We must face the fact that public expenditure once again rears its ugly head. What are the public expenditure implications, in particular for the Health and Safety Executive?
I do not accept the view that changes will not be needed. If the Government accept this directive, we want at least an assurance tonight that the money will be available to enable the Health and Safety Executive to do the job, or at least, where the HSE is not directly involved, to ensure that the job is done. One is talking, of course, about enforceability. I have no confidence in the Government making that kind of provision. The Health and Safety Executive has had a 6 per cent. cut in its budget. It is now less than £2¼ million for 1982–83. That is referred to in the public expenditure White Paper published today. I am told that that means a cut in staff of about 260. The Health and Safety Commission has told the Secretary of State that this must affect its work programme. We know, too, that the frequency of inspections will be hit and that the inspectorate's scarce resources, which the previous

Government were building up, will be more thinly stretched than ever.
Another point about the 6 per cent. cut is that I believe that in effect it is really worse than 6 per cent., because it does not include any recompense to the Health and Safety Executive for the special increases in pay that some grades of staff have now received—although I gather that, perhaps in recognition of this, the HSE is being spared the 2½ per cent. cuts that most of Whitehall has now to bear as part of the Civil Service pay settlement.
If more inspections mean better industrial health and safety and an ability to fulfil existing and potential EEC commitments, that cannot be reconciled with cuts. The Government have had much to say about law and order. They are ready to spend on that. We are entitled to ask whether they are prepared to spend rather more on industrial safety law, and whether they will measure cost-effectiveness with their cost-effective exercises on spending on the police and on defence.
The Government have had much to say on strikes. I understand that we are now losing about 15 million working days a year through incapacity, industrial accidents and industrial disease. That is a far greater loss than the strike toll has produced over the years, even under Conservative Governments, although I should not like to hazard a guess for the future.
The framework directive will give the Executive extra responsibility. There may be argument about the extent of the extra responsibilities, but under pressure the Minister agreed that it will be given some. It cannot hope to play an influential role, especially within the Community, if it is starved of adequate resources. It should be ahead of others within the EEC, as we have been on many health and safety issues over a period. The Minister has indicated that he agrees with that point of view. We do not want to lag behind. We should be pointing the way ahead.
On policy implications, the original explanatory memorandum states:
Legislation does not however
—that is, United Kingdom legislation—
specifically require in the case of the listed agents, all of the additional protection such as formal medical supervision set out in Article 5.


That part of the memorandum has vanished in the supplementary memorandum. We are entitled to ask whether the Government are wholeheartedly supporting the additional protection that is mentioned in the earlier memorandum, which is not cancelled by the later document.
The proposals in the framework directive are well worth supporting and developing so that there is a European-wide basis for notification, monitoring and setting up legally enforceable safety norms for the use of harmful agents in the workplace. I hope that the Government are serious in their determination to give the Executive the tools for the job. After the Minister's speech my doubts are nothing but intensified. If the Government do not give it the tools to do the job, they will be condemned, and stand condemned, of rank hypocrisy not only at home but in the eyes of our EEC partners.

Mr. Donald Thompson: I welcome the draft directive. I thank the hon. Member for Islington, Central (Mr. Grant) for asking such detailed questions. I am sure that the hon. Member for Keighley (Mr. Cryer) will ask detailed questions on the annexes. Therefore, at this late hour I shall not take time to echo the questions that have been asked and will be asked.
My hon. and learned Friend says that the directive fits in closely with present practice in the United Kingdom. I agree with him. However, it is difficult for us in this place to remember the relentlessness of work—for example, how a man starts work at 15 years of age and works for the next 50 years. He goes to work every day and works in an atmosphere which he does not think is noxious or dangerous. It is only recently that long weekends and longish holidays have gone some way to alleviate the effect of that sort of work.
I contracted farmer's lung after only 10 years in farming. I did not know of the dangers and I did not know that the disease would fall upon me. My mother started work when she was 12 years of age. She worked all her life—she thought nothing of it—and died when she was 62 or 63. That is not right and reasonable in these days. We now know more about the cumulative effects of various sub-

stances, and we should not allow people to expose themselves to such substances.
We are only beginning to learn of the extent of the damage caused by all types of dust, as well as by the agents listed. As the Minister pointed out, we must consider the effect of that dust on families. The wife may contract cancer or the children may become subject to lung disease. Previously such diseases were attributed to another cause. We now know differently.
It is wrong to say with hindsight that factory inspectors, employers and employees were wrong. They had no idea. They thought that it was the normal pattern and that all men finished up ill at 60 or 65. Employers and employees used to be their own worst enemies. The employee has always sought a decent wage and 3p or 6p more an hour. An extreme example is that of pin grinders in Sheffield. There are other more moderate examples, such as quarry workers and brick workers. A bricklayer's working life is probably only seven years. He is outdoors all day. Employers have sought to make a decent—not excessive—profit. Both employer and employee have cut corners.
It is a pity that the recent health and safety at work legislation has been enforced in such a pettifogging way. Fussy little details have led to employees and employers holding that legislation in greater contempt than it deserves. Very few, if any, children have been burnt in schools, yet many have been damaged by the use of unnecessary fire doors and so on. It is a pity that that legislation has been spoilt. I welcome this directive. It is necessary. I shall leave the details in the capable hands of the Minister.

Mr. Frank Hooley: This is an important subject. Among other things, the directive says:
Workers shall be provided with results of exposure measurements and group biological tests; individual workers shall have access to the results of their own biological tests. To assist them with the interpretation of the results and to further inform them of the potential hazards of the agents specifically prepared information and documentation at national and/or Community levels shall be made available.
The Minister gave the impression that the health and safety legislation is satisfactory. He implied that it gives all the


protection that one could reasonably ask for.
A chemical agent called 2,4,5-Trichloro phenoxy acetic acid, more generally known as 2,4,5-T, is widely used as a herbicide in forests. It is also used by British Rail for spraying embankments and to kill weeds. There is some doubt about whether the substance is damaging in its absolutely pure form. Unfortunately, it contains a dioxin impurity which is extremely dangerous. I understand that dioxin is one of the most poisonous substances on earth. It not only attacks the liver and causes heart disease, but also causes foetal abnormalities. Dioxin is so dangerous that the World Health Organisation required that its level should be restricted to 0·1 parts per million in any substance. A recent article in the New Scientist states:
in a single day's spraying a worker can be exposed to sufficient dioxin to kill several million guinea-pigs.
The 2,4,5-T became notorious in Vietnam. I do not wish to pursue that aspect. It was in a form that is not used in this country.
Trouble has been caused over many years. There were cases at the Monsanto firm in Illinois in 1949. German workers were reported to have suffered contamination in 1957. There was a case in the Dow chemical plant in the United States in 1964 in which 60 workers suffered contamination. Nearer home, in 1968, there was the explosion at the Coalite plant in Bolsover, resulting in damage to certain workers which has never been properly investigated or examined. Proper access to medical records seems to have been denied to the Health and Safety Executive.
My hon. Friend the Member for Islington, Central (Mr. Grant) was not right, I believe, in saying that this substance is still produced in the United Kingdom. I understand that production stopped in 1976 at Bolsover and that the substance is now imported from Germany. That still means the same problems of control regarding the safety of people who have to use it.
The most notorious example of dioxin contamination occurred in the Seveso explosion in northern Italy which contaminated a vast area and caused severe difficulties for the whole population in that part of the world. I understand that

some investigations took place in the United States, in the state of Oregon, about 12 months ago, towards the beginning of 1979, when it was suspected that many miscarriages were occurring as a result of 2,4,5-T spraying. Following the investigation, the United States Environmental Protection Agency took action to suspend the use of this herbicide in the United States.
The substance has been banned in Italy, the Netherlands and Sweden. I am glad to say that some county authorities in this country, South Yorkshire, Derbyshire, Somerset, and Avon, have stopped using it.
The Minister gave the impression that current legislation on health and safety was adequate to deal, presumably, with this sort of problem. I was astonished to receive an answer to a parliamentary question on 24 March, which had been postponed from 20 March, which said:
There are no regulations dealing specifically with the use of 2,4,5-T".—[Official Report, 24 March 1980; Vol. 981, c. 383].
I find this surprising. I have quoted a history of damage occurring from the use of this substance or from the dioxin impurity that occurs in it over a period of about 20 years in several different countries that has led to the United States Environmental Protection Agency suspending its use. It has been banned in two or three European countries, some of them fellow members of the EEC. Yet there is this categoric statement from the Minister that there are no regulations dealing specifically with the use of this substance in the United Kingdom.
I shall not say that the Minister is complacent. But a gap is revealed in his thinking if he suggests that legislation on health and safety is as comprehensive as it can possibly be made.
There have been eight references of this substance to the Advisory Committee on Pesticides. But the committee has apparently not advised that it should be banned. The trade unions have expressed considerable concern. The National Union of Agricultural and Allied Workers has produced a substantial dossier on the subject. The TUC has formally asked for a ban. It is therefore time that some statement was made by the Government about what should be done.
I should like to raise one final point relating to the constitution of the Advisory Committee on Pesticides. Two important bodies—the dangerous pathogens advisory group and the genetic manipulation advisory group—have been constructed on a new principle, which is that there should be serving on those groups not only expert scientists but trade union and employers' representatives as well as people appointed "in the public interest".
Possibly as a result of this directive, or possibly out of sheer good will on the part of the Government, there should be some restructuring of the Advisory Committee on Pesticides. While I am in no way calling into question the scientific expertise or the integrity of those who sit on that committee—I do not suggest that at all—I believe that if the pressure of opinion of trade union representatives and those serving in the public interest were added to their professional expertise, we might in these instances obtain more rapid and effective action.

Mr. Paul Hawkins: Thank you for calling me, Mr. Deputy Speaker. I also welcome this framework directive. I do so wholeheartedly, and I hope that the Minister agrees. Among the various matters which he outlined, there was a provision to protect our workers who work abroad. There are such workers, and they should be protected in the way in which they would be protected here. That point has perhaps not been raised. Indeed, British industries should not be at a disadvantage compared with industries operating in other EEC countries.
It is a good idea to have the agents named, as the hon. Member for Keighley (Mr. Cryer) pointed out. Personally, I know more about the farm side of pesticides and herbicides than I do about the problems which arise in factories.
Hundreds of new pesticides, herbicides, and so on, have been produced in agriculture since the war. Many of them have had side effects, and worrying effects, when much of what is put on the land gradually works its way into our rivers and water supply.
Coming from an arable countryside where pesticides are used more than any-

where else, I feel that this is a matter about which the NUAAW is rightly concerned. I believe that our workers need protecting, not only against the herbicide to which reference has been made, but against many others.
We need to look very carefully at this whole area. We should look not merely at each herbicide or pesticide which is used, but at the gradual build-up of those substances in the land—the basic material which produces food—and in the water which runs through that land. I believe that over the next few years we shall have to consider that matter very carefully.
The Health and Safety Executive does a first-class job but it spreads its tentacles so wide that it is in danger of making a fool of itself. For example, if all the fire protection regulations were carried out in the Norfolk schools—99 per cent. of which to my knowledge are all one-storey buildings—the cost would be £1,000 million. We could spend that money far better on building new schools, improving existing schools and employing more teachers than in the rigorous way it is insisted that we bring our schools up to date.
One of the few tourist attractions in my constituency is Grimes Graves. They are not graves but old flint workings. There was a wonderful and interesting exhibition about them in the British Museum two or three years ago. Suddenly in the middle of last summer some gentleman from the Health and Safety Executive descended on us and closed down the whole of that area. He said that an attraction which had been open to the public for 24 years was unsafe. He said that there must be different ladders and that the people who went down the workings must wear steel helmets. The workings were not reopened until the middle of the winter and nobody wants to visit them. I believe that the Health and Safety Executive—though it does a good job—spreads its activities far too widely. I believe that it could exercise more effective control without further expense if it withdrew from some of its less valuable activities.
I welcome this directive and I hope that it will improve the health and safety particularly of the farm workers from the arable region of the Eastern counties.

Mr. Dick Douglas: I wish to concentrate upon one point in the draft directive. That is the change which has appeared in the up-to-date version.
Article 5 as redrafted says that there shall be
access by workers and/or their representatives at the work-place to the results of exposure measurements and, in the case of harmful agents for which such tests are laid down, to the anonymous collective results of the biological tests indicating exposure.
That is an important advance on previous legislation and practice particularly in relation to other agents such as radiation hazards. I understood that this draft directive was part of a package of such directives emanating from the Community. Can the Minister say anything of the progress of the draft directive which came before the Scrutiny Committee on 7 November 1979 on radiation safety standards? That directive—R/4555/79—has been making progress through the Community and is at present in the hands of the Council.
There is no obligation under that directive for workers' representatives to be given access. That is important and I make no apology for making a particular constituency point about Rosyth dockyard. Some of the workers there experience difficulty in securing access for their representatives to health and safety records.
I have indicated to the Under-Secretary of State for Defence for the Royal Navy that I would raise this matter. I know of his difficulties and the fact that he is not here is excusable. I had a letter from the dockyard administration on 24 January which said:
Legislation provides that: the radiation dose record as respects any person shall be open to the inspection of that person at all reasonable times—otherwise provision is made only for the records to be inspected by the District Inspector of Factories (generally in conjunction with the Nuclear Installations Inspector), or by the appointed doctor. Insofar as the workers' dose data are part of his medical records, they are treated as 'Medical in Confidence'.
That is understandable.
The letter continues:
The rights of other bodies, e.g. Trade Unions and their officials, to have access to dose information is not defined in the regula-

tions, so it has been necessary to refer your request"—
the writer's request—
to CED for guidance. In consequence the Ministry of Defence is currently investigating the general issue through the Radiological Protection Technical Advisory Committee (RAPTAC) and other 'nuclear' organisations, UKAEA, BNFL, CEGB, etc. are being consulted with a view to adopting a common approach.
I welcome the apparent upgrading of information to the workers and their representatives. What steps will be taken on the hazard which affects my constituents in the dockyard? Smiley's law is applied—who watches the watchers? However, people are entitled to know. It is not sufficient to say that the worker has access to the records. The worker does not have the background of experience. That is why he joins a trade union. A union is a protection agency for health and safety at work. We welcome the regulations and the Health and Safety at Work etc, Act, but it is vital that the Minister states that, with the Defence Minister, he will ensure that the proposal—which is an advance—will be put into other regulations as soon as possible.

Mr. Tony Marlow: I shall be brief because I know that the hon. Member for Keighley (Mr. Cryer) wishes to speak and there is not much time.
I do not doubt the importance of the subject or the depth of feeling among hon. Members on both sides of the House, but I am amazed that we should be discussing the subject this evening. This afternoon we discussed the Budget. It was a good Budget, but I shall not go into that in detail. One of the most important aspects of the Budget is the public sector borrowing requirement. For this year that requirement is within plus or minus £100 million, depending on the negotiations with our Community partners.
I believe that if we do not achieve a satisfactory solution to the European budget it is possible that Britain might be forced, or might desire, to leave the EEC. That is not beyond the bounds of possibility. To discuss the directive on such a day proves that Nero, by contrast, had a great sense of priorities.
We are discussing one of the meddlesome little issues which come from Brussels too frequently. To do so casts the Community down in the eyes of the


country and of many hon. Members. It is a manifestation of the fiction that our economy and trading relationships are exactly the same as in Europe and that we shall join them in a unified and equivalent market and industrial situation. That will not happen. Our industry and trading situation is different.
The directive implies that our Health and Safety at Work etc. Act is inadequate or that we should introduce unnecessary measures. The Minister says that our measures are adequate and that the European measures are not and that if the Europeans introduce adequate measures in line with the directive, their cost factors will be the same as ours and that that will help us to compete.
As I pointed out in an intervention to my hon. and learned Friend, article 7 says:
This Directive and the special Directives referred to in Article 8 shall lay down minimum standards for the protection of workers and shall not affect the right of Member States to apply or introduce laws, regulations or administrative provisions ensuring greater protection for workers.
The day after French agricultural workers burnt the Union Jack, and with all the knowledge that we have of the past, I am quite sure that, whatever Brussels says and whatever this directive says, the French, God bless them, will find a way of introducing stricter and stronger laws than this, which will ban us in certain circumstances from exporting our goods to France, where they will compete with French goods made within that country. Whatever the Minister has said, the proof of the pudding does rather lie in the eating, and the pudding that we have eaten so far has been most distasteful on this subject.
I notice that article 9 says that there is to be a committee, with people from each country and a member of the Commission on it. No doubt these will be famous, important, illustrious, intelligent, hard-working and diligent people. Having assembled in a committee, they will no doubt bring forward new laws, new ideas, new rules, new directives, more officials, more cost, and more burdens for our industry to take on.
I also notice that it says that each country shall have an industrial medicine and hygiene committee, or quango. We

already have a Health and Safety Commission.
Whether this means that we shall have to extend the activity of our existing commission or set up another committee, I am not sure, but it means more work, more officials, and more burdens on industry. I hardly think that it is appropriate that the Government whom I support, on the very day on which in the Budget Statement they have announced the exciting idea of setting up enterprise zones to take the shackles off our small businesses, should also introduce this measure before the House. I am sorry to see it.
The Opposition spokesman says that he is in favour of the measure. He is quite entitled to be in favour of it. We are all in favour of health and safety at work. But he said that there was no point in introducing the measure unless we were to bring forward the money for it. Here we are, doing all we can to balance the Budget and to cut back public expenditure. I ask the Minister: have we got the money?
It was only about six weks ago that we were here late at night discussing the tachometer. If Ministers had asked anyone in the House whether at this stage we wanted to introduce the tachometer, the answer would have been "No". To introduce it will cost £300 million. So here we are, at a time when we are cutting public expenditure because of the severe economic crisis in which we find ourselves, introducing another measure which will do us no good but will considerably increase the costs of this country. It is intolerable.
I believe that we should co-operate in Europe. [Interruption.] Hon Members may laugh. I could go on at great length, but I believe—if I may crave your indulgence, Mr. Deputy Speaker—that the great tragedy is that we have combined with Europe on the wrong issues. We have combined on agriculture and trade, but the nature of our agriculture and trade is quite different from that of Europe. We should unite on other issues. Certainly at the national level we must have laws and make prudent, sensitive and sensible decisions. But at the European level—especially with the crisis that we have over the United Kingdom budget contribution at the moment and the crisis


that we have over the common agricultural policy—to be discussing, disseminating and distributing throughout Europe these pettifogging measures is quite absurd. I am afraid, therefore, that I find it difficult to support the measure.

Mr. Bob Cryer: I shall be brief—no more than about six minutes. I am as strong an anti-Marketeer as anyone and have maintained that position consistently. However, that does not mean that I believe we should ignore everything that comes from the Market just because it comes from the Market. There are many good ideas that come from it and we must examine them to see whether they can be used to improve matters in our own country. It makes sense to do so.
The hon. Member for Northampton, North (Mr. Mallow) spoke about costs. He ought to have a look at the figures. It actually saves money if people are not injured at work. It produces better industrial relations and improves the whole work climate. Since the hon. Member's Government are introducing legislation to control the trade unions, because they are concerned about the loss of days caused through strike action, let the hon. Member remember that in 1976 there were 3·5 million days lost through strike action and 15 million days lost through industrial injury. In 1977, 10 million days were lost through strike action and 15·7 million days were lost through industrial injury. Surely it is reasonable that we should do something about the greatest source of days lost without making churlish comments about such action being a waste of money. It is saving money.
I come now to the directive. The Government have said that they accept it and want to see it implemented. At the same time, the Minister used words that suggested that the Government will do absolutely nothing about it. The Government have introduced an important qualification. There are some good ideas in the directive about standards of health and safety at work. I have here the ASTMS policy document on the prevention of occupational cancer. It is a very good document. I recommend it to the Minister. It points out that the initiative for introducing better standards of care

to reduce the number of days lost through industrial injury has now left the Health and Safety Executive and the Health and Safety Commission. They seem to be doing very little about things, leaving matters instead to the EEC. That is exactly the case with this document. That is a matter for deep regret, especially when the Minister is underlining this policy of controlled inertia by saying that the document is all right but it cannot improve on the standards of the Health and Safety at Work etc. Act.
As I pointed out in an intervention the Health and Safety at Work etc. Act abounds with the qualifying words
so far as is reasonably practicable".
As the Minister knows, those are not casual words. Those are words that represent a legal standard. They represent a judgment of cost. This EEC document is different. It does not say
so far as is reasonably practicable".
That is what the Minister says, and that is how he is qualifying the document. By so doing he erodes the important points in the document, which says that things shall be done. That is an absolute position. Article 4, for example, says:
Member States shall ensure that the measures they establish to protect workers likely to be exposed … shall include".
Then there is a list. Things have to be done. It is not qualified. Article 5, which is important, says:
Member States shall …ensure that:
medical supervision of workers is provided prior to exposure".
That is a requirement. There is a further point about information. The article adds:
To assist them with the interpretation of results, and to further inform them about the potential hazards of the agents, specifically prepared information and documentation at national and/or Community levels shall be made available.
That is not the position with the Health and Safety at Work etc. Act. Inspectors have discretion whether to make, for example, written information available to trade union safety representatives. It is not an absolute requirement of the Act.
My fourth point is that the directive lists a number of substances which it is thought are dangerous. This is in annex 1. There is a list of agents. I point out that the ASTMS document specifically


says, in relation to cancer-causing substances—and we are talking about hazards confronting workers:
The delay in producing carcinogen regulations is a scandal, and the greatest possible pressure needs to be brought to bear on the Health and Safety Commission to introduce regulations along the US lines as soon as possible. Despite repeated requests the HSC has so far refused even to publish and make available the OSHA lists of Category I and II carcinogens—they are not even available to inspectors in the field.
Inspectors in the field do a good job. They are the people who carry out the work of improving health and safety at work, so reducing time lost. The pity of it is that they do not get sufficient backing from the Health and Safety Executive and Commission.
Finally, I endorse the remarks of my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley), who said that the sort of action outlined in the directive was excellent. I only wish that it would apply to the herbicide 2,4,5-T, about which there is a great deal of concern, not least from the National Union of Agricultural and Allied Workers, but also from other trade unions.
I was pleased to note that a Conservative Member said categorically "Let us have protection for farmers". That means action and I am sorry that the directive indicates that the initiative has shifted from the Health and Safety Executive to the EEC Commission. I regret that, because I want to see us maintain and improve our position and not reflect the complacent attitude the Minister indicated regarding our own legislation. I greatly hope that the Government will shift their position and accept the sort of standards the directive indicates.

Mr. Mayhew: We have had a valuable debate on the provisions of this draft directive. The Government's purpose has indeed been served in being able to take some pretty varied opinions from different quarters of the House. The consequence of that has been that very little time remains for me to answer the questions. However, I hope that the House will take the view that that has been the right way to deal with matters. If I may be allowed to write to hon. Gentlemen who have spoken and whose

points I am not able to answer in the few minutes remaining, that perhaps will be the right way to go about it.
The proposal is undergoing development, as I said, in the working group of the Council of Ministers and we do not know how it will emerge. What has been said will be of value to those who represent this country in the concluding stages of its formulation.
I am grateful for the kind words which have been said about the Health and Safety Executive by my hon. Friend the Member for Norfolk, South-West (Mr. Hawkins) and by other hon. Gentlemen. I am glad that the initial reaction of the Government to the draft proposals—that is, one of approval and of welcome—has been widely shared in this House and expressed tonight.
The hon. Member for Islington, Central (Mr. Grant) asked a number of questions and I shall do my best to answer them quickly. He asked how the House would be consulted about special directions that may be given subsequently by the Commission. The answer is—in the normal manner. Each special directive will pass through the normal scrutiny processes of the House.
The hon. Gentleman asked whether participation by workers, which is dealt with by article 6, would tie up with the pattern of workers' representatives established under this country's legislation. I should have thought that that would be an appropriate way in which at local level it could be achieved. Article 6 also relates to consultation at national level. The hon. Gentleman asked, under article 6, about the environment outside the work place and said that doubts had been expressed at this in the explanatory memorandum. He asked whether the directive would be extended to cover environmental matters. The answer to that is "No", but the protection of the environment is, as I understand it, being dealt with separately by the European Commission and this provision of article 6 is intended to ensure only that the directive shall be compatible with the directive that will be put forward in due course concerning environmental matters.
As to annex 1 and the list of agents, the hon. Gentleman asked a number of questions. Annex 1 represents the European Commission's estimate of the special directives that it would be able to bring


forward in the next few years. The list does not preclude alternatives or additions being made to it. The hon. Gentleman mentioned the herbicide 2,4,5-T, the weed killer in which the hon. Member for Sheffield, Heeley (Mr. Hooley) has a particular interest, and spoke of its dangers. The list does not preclude alternatives or additions. At present, the United Kingdom has no proposals to add to it. But all toxic substances are kept under review by the Health and Safety Executive with advice from the advisory committee. I do not think that I can be expected to deal with its composition tonight. However, what has been said will be considered.
The hon. Gentleman asked about radiation. Radiation is being dealt with under the Euratom treaty, and I understand that a separate directive on radiological protection is currently being negotiated in Brussels. That is the answer to the point made by the hon. Member for Dunfermline (Mr. Douglas), but I shall draw the attention of my right hon. Friend the Secretary of State for Defence to the matters that he raised with particular relevance to Rosyth, which is in his constituency.

Mr. Dalyell: What my hon. Friend the Member for Dunfermline (Mr. Douglas) said about Rosyth goes for all Members of Parliament in the area.

Mr. Mayhew: I understand what has been said. That falls to be dealt with under the Euratom treaty. I shall deal in correspondence with the matters which have been raised if I do not deal with them all now.
I was asked whether the draft proposals related to seafarers. It would not, in the Government's view, be appropriate for this directive to deal with questions of health and safety at sea. Those matters are better dealt with by other international organisations with great experience and expertise in these subjects.
I was asked about timing. The Commission's intention is that the matter should go for adoption by the Council of Ministers in June this year.
As regards public expenditure, the directive is not expected to lead to additional industrial costs. We already have comprehensive safety and health legisla-

tion in this country. Where we recognise the need for further improvements our statutes make provision for regulations. The legal framework in other member States is not in all cases as comprehensive as ours. If the directive results in those States introducing similar provisions, it could result in workers in those countries benefiting and our industries competing on a more equitable basis.
My hon. Friend the Member for Northampton, North (Mr. Marlow) took a sharply contrasting view of this directive and asked why we were discussing it, with particular relevance to cost and the earlier business today. What I have just said about cost is the answer to that.
My hon. Friend the Member for Sowerby (Mr. Thompson) made the important point that in many instances workers with repetitive jobs became their own worst enemies, and he welcomed—

It being one and a half hours after the commencement of proceedings on the motion, Mr. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 3 (Exempted Business).

Question agreed to.

Resolved,
That this House takes note of European Community document 5394/79 for a Council Directive on the protection of workers from harmful exposures to chemical, physical and biological agents at work.

NATIONAL COMMUNITY SERVICE

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Mather.]

Mr. Tony Marlow: With your leave, Mr. Deputy Speaker, I should like to discuss the subject of national community service.
If I can start with a very brief outline, the idea is that this scheme should involve young people between the ages of 16 and 21—boys and girls—and that it should last for a year. It should be not exactly unpaid, but they should be given pocket money while completing their service. It would concern mainly environmental or social service, but there would be a military option as well.
That sort of scheme has been under active discussion by a great many organisations. With every day that goes by the discussion is becoming more interested and detailed. Community Service Volunteers, which is one of the foremost organisations in the country in this field, is interested in the subject, as is the Birkenhead Council for Voluntary Services. I believe that the Royal United Services Institute is carrying out a study of the subject. The noble Lord the Lord Bishop of London initiated a debate in the other place not so very long ago.
I have always been interested in the subject. I have a military background, but the House should not be misled into believing that I am thinking purely in military terms, of sustaining a military policy or anything of that sort.
I wrote to my right hon. Friend the Prime Minister on the subject. She pointed out that the Under-Secretary of State for Employment was operating a very effective scheme through the Manpower Services Commission for young people at the moment. No one knows what might happen in the future. It may well be that some aspect of the scheme, if not the scheme itself, could be of great benefit to the country. As a result of that there was an article in the press. As a result of that article in the press the various organisations that I have been talking about have been in touch with me, and I have had detailed discussions with quite a lot of people.
I had an Adjournment debate on dogs once upon a time. This is a subject rather like dogs. One is not really sure to which Department or Minister it belongs. This subject could belong to the Education Department. It is to do with youth. It could belong to the Home Office because that Department is concerned with voluntary services.
I am absolutely delighted that I have drawn the jackpot, because my hon. Friend the Under-Secretary, who I know is very sympathetic and interested in this subject, is just the person whom I would want to answer this debate, and I am delighted to see him here.
To take "national" first, many people feel that we are rather a narky and divided society at the moment. That is obviously to do with the failure that we have had in many fields of national life

and national endeavour. In many ways we lack a sense of nationhood. Strangely, other countries in Europe have been more successful than us. All the other major countries in Western Europe have some form of national service. They also have alternatives for conscientious objectors or people who do not like military service to do some other form of service. I do not judge whether that is cause and effect.
We come now to "community". One of the features that has fallen down recently is our sense of responsibility for other people—our sense of general responsibility for the less fortunate members of society. Those who were in national service will remember that people came in as individuals of all different shapes and sizes, with their own personal priorities and requirements. They were rather selfish and inward-looking. Within a period of six weeks of basic training they were not individuals any more. Of course they were individual people, but they were also members of a group and they were interdependent. They looked to each other, they looked after each other and they had concern for others. In many ways their whole horizon of human relationships had changed. I think we want to imbue in our people a much greater sense of community than a lot of people have at the moment, unfortunately.
"National community service": His Excellency Kingman Brewster, the American Ambassador, gave a very interesting speech not so long ago in which he talked about the "entitlement society". I think many hon. Members are aware that many pople look to the State to provide. Those who do not look to the State to provide are inclined to be quite often selfish and go out and grab and get all they can for themselves. It is important that society is imbued with a much greater sense of service than it has had for some time.
I would hope that it would be a broad-based scheme, taking people from all sections of the community—different classes, colours, religions and from different parts of the country—and bringing them all together.
They would start, I suggest, with three months of something akin to Outward Bound training, up in the Scots mountains or across in Wales—getting a bit fitter, working together, taking on little


tasks and projects, stretching themselves, discovering themselves, getting a sense of team spirit. It would be educational, in the best sense of the word.
Having done that induction, they would have various options and various directions in which they could go. They could go into social work, help in hospitals, help old people—decorating their houses, doing their gardens, visiting them—help handicapped people. We do not have the resources to deal with the many problems that we face in our society. There are hundreds of things that could be done.
Alternatively, they could take on an environmental option. Many of our inner cities are most unattractive at the moment. They are derelict and desolate and there is a lot of work that could be done to make them more attractive. If they were more attractive, more people would live and work there. We could regenerate our inner city areas.
Canals that are silted over could be cleared out. Work could be done in national parks and on private estates. Many environmental things could be done. It may be that one day we shall get involved in a large national project, such as a Wash barrage, a Severn barrage or a Channel tunnel. Those are projects on which some of these people could be happily involved.
Another option—and no more that that; no one would put pressure on people or suggest that they should go in this direction—could be a military option, almost a cadet version of national service, with three months' basic training and nine months to follow. It would be nine months' basic military training in fieldcraft, basic military skills, shooting, driving vehicles and signalling. Those are skills that would suit them at the end of their service for becoming reservists, for work in civil defence or in the many areas for which we just do not properly cater at the moment.
We have a fine professional Army—probably the best in the world for its size—but we have a small reserve force. The new scheme would be one way in which we could build up our reserve forces.
Among the other options, we could bring in all that is happening at the moment. We could bring in the voluntary services that we already have. They

could be knitted into the scheme. We could bring in apprenticeships. People could do the three months' basic training and go on to an apprenticeship. We could make conditions—I am only making suggestions at the moment—that anyone who was going to be a school-teacher should perhaps be required to go through the course before training as a schoolteacher.
We could make another requirement on university grants—students would get a full grant if they had been through the course, but part of the grant could be a loan to be repaid if someone had not been through the course. There are all sorts of tunes that one could play with such an operational idea.
I believe that, as I have said before, it would be educational, in the best sense of the word. Some people are born and brought up in a single environment, are perhaps unemployed for a while and then get a job—perhaps not a satisfactory job—without ever having had the opportunity to travel, to meet people from different backgrounds or to see other activities, other jobs and other things that they may wish to take up.
I am also convinced that anybody going through the scheme would be far more employable at the end of the scheme. There would be queues outside the jobcentres waiting to take on people who had undergone the training. It would be a valuable experience for many of our young people to take on before they finally settled down or before they were in a position to decide how to settle down in a particular job, operation or career of their choice.
Another point which could be for discussion is that I suggest that it may be appropriate that those on the scheme to have a sort of semi-uniform. Perhaps they would wear blue jerseys and jeans and wear little badges to identify the unit or sub-unit that they belonged to. In that way they could build up and engender an esprit de corps—"We are doing a grand job, we are doing it together."
They would live communally. Obviously, when undergoing Outward Bound training they would live communally, but when they came back they could live communally. Naturally, someone from Liverpool could decide to do the nine months in Liverpool or in Winchester. This scheme could be very flexible. They


could do three months on environmental work in London and six months on social work in Manchester. There would be a whole range of options which people could choose so that they could gain the experience which, with guidance, they felt would suit them best.
As regards accommodation, I believe that we could take advantage of a lot of semi-derelict property that exists at the moment. We could use some of the schools that will become vacant as the school population falls. Course members could move into a school or a derelict house that was scheduled for demolition but had not been demolished and bring it to a standard that was suitable for the period of their stay within the organisation.
Should such a scheme be voluntary or compulsory? I think that it would be untenable in this day and age to start off with a compulsory scheme. I do not believe that we should ever want to go for a compulsory scheme, although I can see the advantages of doing so in that if such a scheme were voluntary, some of those who would best benefit from it would not, in any circumstances, participate. But I understand that there are 950,000 16-year-olds at the moment and it would be quite impossible to set up a scheme overnight for 950,000 people. So making it compulsory is not on.
After the scheme has been running for a year or two, it may be advisable to withdraw unemployment pay or supplementary benefit from anyone between the ages of 16 and 21 until he had been through the scheme, because in all fairness it would be an opportunity that would be available; it would be employment which these young people could take on if they wished to do so. This is a controversial point, but if anyone were trying to destroy the scheme he would say "We cannot afford it. Where will we get the money from?" I understand that unemployment pay and supplementary benefit for young people runs into hundreds of millions of pounds, so it would be a very potent source of finance.
There are also the schemes such as the youth opportunities programme run by my hon. Friend through the Manpower Services Commission. There will be

between 250,000 and 260,000 places this year, I understand. I am told that with the pay that such people receive, the cost of administration and everything else, those places actually cost £40 a week. I am further told that some of the voluntary organisations running their own activities can achieve voluntary work at a far smaller cost.
I have suggested that there would not be any pay but merely pocket money. All would be found; clothes, food and accommodation would be provided and there would be £5 or £7·50 per week on top of that. But some of the money from the youth opportunities programme could be moved in the direction of the scheme because I believe that some of the benefits of it—I shall hear what my hon. Friend says in a moment—are at least as good as some aspects of the youth opportunities programme.
There are jobs that could be done for private enterprise and for local authorities and we could obtain fees for that work. Also, as time went by, there would be a possibility of substitution. Some of the work that is currently done for local authorities by high-priced labour I think would be better done and done with enjoyment by young people in the scheme. Again this is a sensitive issue which would have to be phased in so as not to take employment rights from anyone.
An optimist always looks upon a problem as being an opportunity and we have plenty of problems around at the moment. Young people aged 16, 17 and 18 want to make their mark. If they cannot make their mark in a way that will satisfy them and the community, they are all too prone to make it in a damaging way. I believe that if we were to set up a scheme such as I have suggested young people who now uproot trees would be proud to plant them; young people who mug old ladies would be proud and pleased to help them.
We have many other problems with the environment. There is much that we should like to do for the environment. We have vast numbers of elderly and disabled people whom we are only beginning to help. We regret it, but we do not have the resources to deal with this problem.
As I have said, we have the problem of the reserves being under strength.


We have no proper civil defence system. We have problems of an undisciplined, a selfish, a centrifugal society breaking apart at the seams, particularly in many urban areas. I believe that a scheme such as this could be of great benefit and overcome many of those problems. So, as I say, a problem can be an opportunity.
I know that my hon. Friend will have his brief. I know that he is sympathetic about many of the objectives I have been outlining. I would not expect him to give any commitment of any sort, but all I would ask him, please, is to look at this proposal. It is not just my proposal but a proposal that other people have made. It is not something that is going to start overnight; perhaps 20,000 people in the first year, 40,000 people in the second year, and so on and so forth. But I ask my hon. Friend to look at the proposal with his colleagues with a view to deciding whether they can introduce a study. I would not ask him tonight if he would introduce a study, because I am sure he would not be in a position to say so. I would just ask him whether he could investigate the possibility of introducing a further detailed study of this scheme. There is one at the moment going on in the United States of America which will be reporting in two years' time, and I would hope that we can do the same here.

The Under-Secretary of State for Employment (Mr. Jim Lester): I am pleased to be able to reply to this debate, and I am pleased that it should be my Department that has landed it, even though it is after midnight on Budget day. I am sure that my hon. Friend the Member for Northampton, North (Mr. Marlow) will realise that I shall not follow him down the military route, but I am sure that the Ministry of Defence will read his comments and comment on them. But what I am pleased about is that this debate has shown once more the opportunities which are open to a Back Bencher to bring new ideas to the attention of the House and a wider public.
I congratulate my hon. Friend on both the time that he has devoted to the development of his proposal for a national community service and the very clear way in which he has explained his proposal tonight. I hope that many people, both inside and outside the House, will give

their views on what he has suggested. I was interested to hear of the reactions that he has already had.
I should like to discuss, first, the size and nature of the problem which so concerns my hon. Friend and me, and, indeed, my ministerial colleagues. I should then like to talk about our experience with the youth opportunities programme, in terms of its cost and effectiveness, and then explore the considerable common ground between us.
As my hon. Friend has already suggested, I do not think that it will surprise him that I shall be expressing certain doubts and qualifications about his idea. Indeed, I think that he would be very much more surprised if I were to announce tonight that the Government had decided to accept his proposal lock, stock and barrel. But there is much, as will become apparent, on which we can agree.
We clearly share a concern about the high level of unemployment among young people. In particular, we are anxious that school leavers should be able to make a good start in their working lives. One can scarcely think of a worse start for a school leaver than to suffer a long period of unemployment, with all the attendant difficulties which my hon. Friend has described.
Youth unemployment is, of course, only one part of the general problem of unemployment. For a permanent solution we must look to an improvement in the economy as a whole and to the policies set out by my right hon. and learned Friend the Chancellor of the Exchequer earlier today. But, at the same time, we must continue to look for constructive alternatives to unemployment for those young people who have not found jobs.
I was interested to hear that it was not just unemployment but the sense of national identity which my hon. Friend was developing in addition to that.
I also want to make it clear that nothing I say tonight should be taken as in any way detracting from the activities of the Outward Bound Trust. Outdoor activities have a contribution to make to the development of responsible attitudes, including awareness of others, self-discipline and self reliance, and the role of Outward Bound is well known and respected.
I hope that I have said enough both tonight and on earlier occasions to show that there is no complacency in the Government about the level of youth unemployment. It would be wrong, however, to give the impression that youth unemployment is out of control and rapidly rising. Each year, currently, about 700,000 young people leave school. The number of school leavers still unemployed in December 1979 was some 35,000. In other words, most school leavers enter employment or further education without first going through a long period of unemployment. The latest figure for unemployed school leavers was released by my Department yesterday. It showed that the number unemployed in Great Britain this month was 28,787. This is fractionally less than the figure of this time last year but nearly 9,000 less than the figure in March 1978.
Of course, one of the main reasons why there has not been a rise in youth unemployment over the past 18 months is the support given both by this Government and by the previous Labour Government to the youth opportunities programme. This programme has grown considerably since its introduction in April 1978, with its range of opportunities for unemployed young people in work experience schemes and training courses, and by the end of February it covered some 95,000 young people currently in training.
The emphasis of the programme is not on simply removing young people from the unemployed register but on giving them an experience which will make them more attractive to an employer at the end of their course, and this may well be more a matter of maturity, motivation and confidence than of learning specific vocational skills.
Because it is comprehensive and is available nationally and to every young person who qualifies, the provision in the programme is very varied. It must cater for all groups among the young unemployed. It must meet the needs of young people with a wide range of abilities and interests coming from widely differing backgrounds, very much like the national service that my hon. Friend and I both entered. It must be flexible to reflect differing local circumstances and emerging needs. The objective of all parts of the programme is to give unemployed young

people the chance to join the working community.
Some elements of YOP bear a resemblance to parts of the proposal put forward by my hon. Friend. First, one type of work experience which is on offer to unemployed young people is in community service. Between 1 April 1979 and the end of January 1980 it is estimated that nearly 17,000 young people, including school leavers, entered this part of the programme. Community service offers young people the chance to gain work experience in various forms of health, welfare, social and educational services. I am anxious that more use should be made of this type of service.
Secondly, it has always been the view of the Manpower Services Commission that every young person in the work experience elements of the youth opportunities programme should have the opportunity of appropriate further education or off-the-job training. An increasing number of young people within the programme are taking advantage of these opportunities on a day or part-time release basis, the greater number of them going to colleges of further education.
The education and training thus provided includes in particular training in what have come to be called life and social skills—essentially, how to cope with the demands of working life, how to work as a team—a factor my hon. Friend referred to—to communicate effectively and to take responsibilities. Some of this training has been provided experimentally in a residential setting, especially where day release facilities are not practicable and where residential provision is more cost effective or where a residential course is necessary to meet a young person's need in terms of personal development. Some courses combining both day release and residential elements have been authorised in exceptional circumstances.
Calls on the Manpower Services Commission to provide a more extensive outdoor education element to the off-the-job learning are being made increasingly. Before embarking on such a programme, the Manpower Services Commission is making a careful study of the experimental provision thus far made. The indications are that a number of problems need to be overcome—the selection of trainees needs to be carefully made, there needs to be a clear understanding of what is expected or


required, and good communication is necessary with the sponsoring organisation.
The value of outdoor education and residentially based training courses for leadership training has long been supported by leading industrial and commercial sponsors. For the less able, the less confident, the socially maladjusted and the less motivated youngsters who make up at least a part of the youth opportunities programme group, the value of such courses has not been so apparent.
Given the increasing concern with cost-effectiveness in all public spending, the Manpower Services Commission must more than ever be sure that any greater use of outdoor education facilities in YOP is directed to improving the work motivation and personal development of those involved.
The Commission is therefore considering what criteria should be established for the use of Outward Bound type facilities that will meet these requirements. I am sure that my hon. Friend will know that the Government have decided to rely on YOP in the 1980–81 financial year to provide young people with a real and constructive alternative to unemployment. As he said, we are extending the scheme and the number of entrants will increase from some 210,000 this year to 250,000 to 260,000 in 1980–81. The number of filled places will increase to 100,000 to 105,000. That expansion will enable us to operate for a further year our undertaking that no Easter or summer school leaver who remains unemployed by the following Easter should be without the offer of a suitable place on the programme.
For the longer term, I do not think we should ignore what is known about the size of the age group, particularly when we are discussing a proposal to set up a new national organisation. The 16–19 age group will reach a peak in 1981, and then begin a long and substantial decline. In the 10 years up to 1991, the age group will fall by some 25 per cent. This will have implications for many aspects of national policy, but not least it may have some effect on the employment situation for young people.
I want now to make some specific comments on the proposal we are discussing

tonight. I start with costs. On this day of all days in the year, that must be in all our minds.
If we look at YOP for a comparison, the MSC will be spending some £150 million in 1980–81 on this programme. There are certainly savings elsewhere on the unemployment benefit and supplementary benefit which would otherwise be paid. One rough and ready rule of thumb suggests that net costs are perhaps half of gross costs. Even so, considerable sums of additional expenditure are clearly involved. That is why YOP and other special employment measures are reviewed annually by Ministers in order to ensure that the programme to reduce unemployment is within a level of expenditure that we can afford.
Similarly with the proposal for a national community service, there will be a cost. Moreover, the longer the period during which individual young people are covered by the service and the greater the residential element, the greater that cost must be. I understand that any proposal should be voluntary and I am relieved that there will be no suggestion of compulsion, because of difficulties that would then arise. Moreover, community service grudgingly given might be of no benefit to anyone.
However, my main point has already been implied in what I have said. We already have a scheme that aims to prepare unemployed young people for employment and for a full role in society. Therefore, although I share my hon. Friend's objective that young people should contribute to society, there remains a difference between us on the means of achieving it.
Nevertheless, I am glad that I have had an opportunity tonight to learn more about my hon. Friend's proposal. I look forward to further discussions with him about ways in which his ideas—which, I well know, are the product of considerable thought and effort—can help us ensure that our programmes for young people prepare them as fully as possible for the world that we have created.

Question put and agreed to.

Adjourned accordingly at thirteen minutes past Twelve o'clock.